Leverage in Spreadbetting

[Woodlandbear]

Hi guys,

New to this but was looking to start spread betting using £10 per point using all my own money (ie no leverage). I've been told you cannot do this and that leverage is obligatory on Indices at 20x (5% margin). Not really sure why but hey.....

So instead, if I just bet 50 pence per point, and then use the obligatory 20x leverage the bet in my mind will be exactly the same £10 per point (50p x 20 = £10). Is this how it works or am I missing something? I cannot get a clear answer from the online IG support on this one. 

Thanks in advance.

[CharlotteIG]

On 10/09/2020 at 14:46, Woodlandbear said:

Hi guys,

New to this but was looking to start spread betting using £10 per point using all my own money (ie no leverage). I've been told you cannot do this and that leverage is obligatory on Indices at 20x (5% margin). Not really sure why but hey.....

So instead, if I just bet 50 pence per point, and then use the obligatory 20x leverage the bet in my mind will be exactly the same £10 per point (50p x 20 = £10). Is this how it works or am I missing something? I cannot get a clear answer from the online IG support on this one. 

Thanks in advance.

Thanks for your post. 

If you put down £0.50 per each one point movement in the direction you selecting will gain you £0.50. Say you wanted to trade on the FTSE (and considering you weren't using stops) you would have to put down (price of FTSE x £0.50 x margin factor). That is your holding deposit then the market would move round and your profit/ loss on the FTSE would have an impact on your available funds. 

If you want to have it that every point movement gains you £10 you have to use £10 per point. Leverage means that instead of purchasing the underlying asset you put down a percentage of the consideration of the trade then depending on which way the market moves you gain or lose that money. 

If what you mean was you wanted to invest £10 on indices without leveraged this isn't something we can offer. 

I hope this helps. 

[gezmond]

Hi Woodland bear, I understand where you are coming from, you are trying to  do the equivalent of a “ cash secured put “ in option trading. 

You could actually do what you want pretty much , as long as the index/ share you want to bet on isn’t too high for you to “ cover” with cash in your account 

 

eg say the ftse 100 is 6026, if you had £6026 , this would cover a £1 per point bet .....alternatively, if you wanted to bet on a share that was 85p you would only need £85 in your account to cover a £1 a point bet.

However if you don’t use any “leverage “ and your cash covers your bet as described above, you are no better off than just buying the actual share or index tracker

Imo it is worth using some leverage to hopefully drive your profits higher....but too much and you risk blowing up your account as you know!