Page 1 :
Page 2 :
Page 3
Deposit Margin
Deposit margin with spread bets is simply the amount of money that is needed to open a spread bet position. Most spread bet brokers work off what they call the 'margin factor', or the 'deposit factor'. This is a number that is multiplied by the stake that you wish to trade regardless of whether the position is long or short.
For example, say the margin factor or NTR is 200 for the FTSE 100, then in order to trade the FTSE at £2 a point you would need to have £400 in your account, or have access to it via a credit account.
How Much Is The Margin Factor?
How do you know what the margin factor is? It will be clearly shown on your spread betting company's website, or you can simply call them.
The initial margin rates do not change that often unless there is a significant jump or reduction in volatility, either in the market as a whole (e.g. stockmarket) or the specific market relating to the spread bet in question (e.g. gold).
For example if the FTSE 100 had been very quiet for a number of months the Margin factor is likely to be reduced. But if daily moves of 100-200 are common then it will be increased.
Maintenance Margin
The running profit & loss of a spread bet is referred to as 'marked-to-market', and this is done in real-time as prices move up or down.
This means that both profits and losses are credited/debited from an account as trading positions move in or out of profit. If a spread bet trader bought £1 of the FTSE 100 at 4200 in the morning and then an hour later the mid price was 4250 the account would have been credited £50. But if in the afternoon the market slipped back to 4,200 the £50 is debited from the account point by point as the market moves lower.
This is in contrast to how the traditional stockmarket works where profit and loss is only realised when the shares are finally sold. Variation margin is therefore critical to the risk management of spread betting companies. They in effect have to make sure that all losses are able to be paid as they accrue.
Effects of Maintenance Margin - Note that Initial Margin never moves
