S&P stands for Standard & Poor’s, and the S&P index is based on the share prices of the top 500 US companies, and is considered one of the major indices. Looking at the spread betting providers list of indices, the current price for a rolling daily bet is given as 1239.09 – 1239.79. The spread is only 0.7 of a point with this particular provider, and you will find that a small spread applies with most spread betting companies, because of the amount of trading on this popular index.
You decide that the S&P may go up, and you want to place a spreadbet of £6 per point on this. As it is an up bet, the bet is placed at 1239.79.
In due course, the S&P index does go up, and you close your spread bet when it reaches a quote of 1296.30 – 1297.00. As you are effectively selling to close your bet, it closes at 1296.30.
You calculate your profit like this: –
- the number of points you have gained is 1296.30-1239.79
- that is a total of 56.51 points
- your stake was £6 per point
- so your winnings are 56.51 times £6
- which works out to a total of £339.06
if you had guessed it wrong, and the S&P went down, then you might close your bet when the quote is 1219.02 – 1219.72, taking the loss quickly before you lose any more.
Here’s how you work out what you lost: –
- the number of points you lost is 1239.79-1219.02
- that is a total of 20.77 points
- your stake was £6 per point
- so you lost 20.77 times £6
- total losses are £124.62
The S&P is a popular index, so your spread betting company will probably offer several ways to bet on it. The current quote for a futures based spread bet six months away is 1228.50 – 1229.50. If you think that long-term the index is going down, you might place a short bet for £3, which would be at the selling price of 1228.50.
Assume that in due course the index goes down to a quote of 1136.45 – 1137.45, and you decide to take your profit. Here’s how you work out how much you made: –
- the total number of points that you gained is 1228.50-1137.45
- that works out to 91.05 points
- your stake was £3 per point
- so you won 91.05 times £3
- your total profit was £273.15
As pointed out above, the index may not go in the direction that you want. Say that instead of going down it had gone up to a level of 1257.93 – 1258.93. You might make a decision to cut your losses, and close your bet.
- You lost 1258.93-1228.50
- the number of points you lost is 30.43
- your original stake was £3 per point
- therefore you lost 30.43 times £3
- that means your total loss was £91.29
it is important that you realize that you cannot control a market, or predict it with certainty, and that you cut your losses as soon as you realize that your losing position is not going to turn into profit.
Trading Strategy: How to Spreadbet the S & P
S&P stands for Standard & Poor’s, the large US financial company responsible for financial ratings, indices, and investment research. Since 1957 they have produced the S&P 500, sometimes just shortened to S&P, which is one of the leading indicators of the health of the US economy. Because it reflects the price of 500 top US companies, some would argue it is more important than the older Dow Jones Industrial Average index which combines carefully weighted prices from just 30 companies.
In fact, both indices do a good job of showing how well the US economy is doing, and they tend to trace out the same type of line on a chart. This line has been showing lots of volatility in recent years, as you might expect in the current unsettled financial climate. As a major index, the S&P is likely to have a minimal spread in the quote from your spread betting company, giving you more profit. Some companies referred to this index as the US SPX 500.
Even if you’re not interested in trading the news, if you intend to do much trading on the US markets that are certain events and announcements that you must watch out for – either to avoid because of indeterminate outcomes, or to aggressively bet in an active manner.
One of the movers of the market is the Federal Reserve Board, which is in charge of the currency supply and sets the base interest rates. The announcements from this board are typically guarded and cryptic, but the interest rate is a hard fact that can be interpreted into the figures. They meet about every six weeks.
Sometimes it seems there are one or two major financial announcements every day, but if you watch the index you find that some of them make little difference. The “non-farm payrolls” figure is a revealing glimpse into how the economy is doing. Do not be put off by the cumbersome name, it simply means that it does not include seasonal agricultural workers. It does include basic hourly wages and how many hours are typically worked in general by US workers.
Of course, the frequent issue of jobless claims numbers, a political hot potato, can surprise and affect the markets. This counts the number of claims for unemployment benefits, and many have argued that it does not reflect the true number of unemployed or underemployed individuals, as some give up and do not bother claiming, but it does give you a comparative number week by week to judge whether the economy is improving or getting worse.
Above all, if you’re looking at these indicators and other major figures for an idea of where the index is going, bear in mind that frequently news is leaked in advance, or otherwise anticipated, and thus is already included in the price that you see. As always when spread betting, you should take care to use a proven trading strategy, and make sure that it includes some protection against the risk of dramatic losses, by requiring you to close your bet before it goes too far against you.