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But how can you hedge your own spreadbet?

Hedging your Own Spreadbet
Written by David

I guess I’d lose out on the spread by shorting my own long but at least I could set a floor on any further losses this way? I have no idea anymore what direction this market is headed. I’d prefer to protect my capital at this point but wait it out for a few days till a trend re-emerges rather than just call it a day now.

Spread traders are able to go short and profit from falling markets on a wide range of financial instruments. That means that you can lock in profits associated with an investment you wish to hold in the long term – let’s say for tax reasons – by taking a matching short position. Such a trading strategy can be ideal in times of market turmoil.

The hedging facility offers you the opportunity to have directionally opposing bets in the same contract at the same time. For instance, if you have a short position in the UK 100 Rolling Future, you can also open a long position simultaneously. Not all spread betting providers allow you to do this because with some spread betting companies after the initial short position is opened, any subsequent buy order in the same contract would net off the sell order and close the position, realising any profit or loss.

However, a few platforms permit you to ‘Force Open’ a new position by say, selecting the ‘Hedging’ button. This means you have full control over which trades you open and close and when that happens. This feature is particularly popular with investors with certain technical trading strategies.

Let’s assume that for a particular reason you want to short your own long spread bet. Some spread betting firms (IG for example) have a ‘Force open’ button, which allows you to open a contrary position without it reducing your initial position.  With IG Index you can have tickets running in all directions, Eg if you’re short and want to go long on the same item open a new tab and tick “force open”.  This will open a new position and keep the original one going also.  Beware that some providers do not offer this facility – for instance opening an opposite position with City with the same expiry would automatically close your long trade – but in any case a phone call will clear that up.

Of course if it is a quarterly bet that you want to hedge, you could take an opposite position on the same stock in a different quarter… If you hold a September long, you should be able to open a December short to balance it in times of turmoil [test with a minimal Dec bet to see if it adjusts your September bet or not].

Note: You can also hedge a diversified shares portfolio via spread betting by taking on short positions on indices like the FTSE 100 or FTSE 250. There is no commission on spreadbets and profits are free from Capital Gains Tax which makes it a particularly attractive way of protecting yourself without have to absorb the costs associated with liquidating your portfolio (and then re-purchasing the shares individual at a later date and having to pay stamp duty all over again). You may also spread bet on most individual shares to go down as well as up.

You can protect your existing shares against market movements with spread betting.

About the author


I first cut my teeth in the Square Mile in the winter of 2002. I was young, fresh-faced and straight out of university; keen but maybe a little naïve about the way the investment world really worked… A few years ago I discover a whole new world of opportunity: spread betting on the financial markets.

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