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FAQ Page 1 - Question 08

Q: If I'm bullish on UK stocks and bearish on German stocks can I trade the spread, i.e. go long FTSE and short Dax?

A: Of course, this would be know as a spread trade or as some call it a Pairs trade - click here for more information on Pairs Trading.

One of the beauties of spread betting is the flexibility offered and going long FTSE/short Dax is a very common trade among speculators. However when considering a trade you should always try and balance the two sides into an equal bet. If you were to go long £5 of FTSE and short £5 of Dax you may well find that this is an unbalanced spread bet.

What I would do is.

  • Take the current value of the FTSE (4242) and the current value of the German DAX (3536)
  • Divide one into the other to get the ratio
  • In this case 1.19 to 1
  • I would then trade £1.00 a point in the FTSE for every £1.19 in the DAX

But of course most Spread Betting companies wont take a £1.19 trade, so if you're going to trade the trade round the numbers up or down. I would make the Dax trade £1.25

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