An Example Of A Daily Spread Bet - Vodafone

• The rumour surrounding Vodafone one morning is that it is about to merge with another company
• Vodafone's share price is 10p higher in early trading
• You don't believe the rumour and feel that the shares will likely trade lower that day
• The spread betting broker is quoting a daily market price for Vodafone of 131-131.5
• Why trade the daily and not weekly or monthly Bet? Because the Daily will have the tightest bid-offer spread
• You sell £25 a point to go short at the bid price of 131 using the daily spread bet quote
• Later on that day the rumour is officially denied and the shares dive 8p towards the close

Further Selling is Likely

• You can of course take your profit at the close of business but you feel that there will be some follow through selling the following day
• Because you are using a Daily Bet which expires that day you will have to roll it over
• If you didn't want to roll the bet you would either buy it back during trading, or simply let it expire at the settlement price
• Vodafone closes in the cash market at 123p and your daily bet is automatically closed at this price
• Because you have instructed your spread bet broker to roll the bet he opens a new short position (also using a Daily bet) at 123p minus a small charge of say 0.3p which reflects the daily interest
• You are now short of Vodafone from 122.7
• In the morning Vodafone opens at 123 (mid price) and then quickly moves lower to stand at 120-120.5 on the Daily spread bet market
• You decide to take your profit by buying the offer (of the spread betting companies daily bet) at 120.5

Total profit on the trade is as follows