Spread Betting Glossary
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AIM
The Alternative Investments Market (AIM) is the most successful growth market, where companies seeking to raise capital to expand/launch their business.
Arbitrage
When two assets trade at different prices, the opportunity for an arbitrage can arise. Using these different market prices to make a combination of bets that will leave you in profit regardless of the outcome. These sorts of opportunities are rare however.
Ask Price
Also known as the 'offer price'. The price at which a seller is willing to part with his/her assets
Bear
The term given to someone who bets (down) against an asset, taking a negative view on its outcome. The opposite to a bear is a 'bull'.
Bear Market
The term given to markets when they experience heavy, sustained losses over a relatively short period of time.
Bid Price
In spread betting terms, this is the same as the 'buy' price of your chosen instrument.
Binary Bet
A binary bet is a simple bet offering a 'yes/no' out come. In spread betting, this might be whether you believe the FTSE 100 will be above a certain value at a given time. Your maximum potential profit/loss will be known ahead of time due to the nature of the bet.
Bond
A government or corporation issued debt certificate. An investor will typically purchase a bond certificate (lend money to said government/corporation) and expect to be paid back in full plus the interest agreed on the bonds maturity date.
Bull
The term given to someone who takes a positive view on an asset, betting on their rise. The opposite to a bull is a 'bear'.
Bull Market
The opposite of a Bear Market, a Bull Market sees strong growth in assets due to overall investor confidence and wider expectations that the current pricing of assets are undervalued.
Bund
The name given to German government's bond (see Bond).
Buy Price
In spread betting the buy price is the price at which you intend to buy (go long) into a market. This will be the higher of the two prices quoted (the opposite of the 'Sell Price').
Contingent Order
A contingent order is used to manage risk on an already active position. A contingent order will be executed once certain conditions have been met on the traders position(s). One such contingent order would be if a trader were to place a stop loss on a trade in order to minimise their total exposure and exit a bet should it go against them.
Contract Length
The length of time a position is open for before it expires.
Cover
An off setting transition to limit liability.
Cyclical Stocks
Stocks that rise and fall quickly in line with economic growth.
DAX
The DAX (Deutscher Aktien IndeX) is a German stock index representing the 30 largest companies trading on the Frankfurt Stock Exchange.
Daily Bet
A daily bet is a spread bet whose contract length is for one day only. Typically daily bets will roll over to the next day and be automatically reopened by the spread betting firm.
Day Trader
A Day Trader refers to a speculator who trades on a very short time frame, opening and closing positions within the day, closing out most positions before the end of the day. Day Traders will play the volatility in the markets and react to the days events accordingly.
Dead Cat Bounce
The term given to a recovery in a declining stock.
Derivative
A derivative is an instrument whose value is 'derived' from some other asset/value. An example of a derivative would be a spread bet or future contracts. You don't own the stock or commodity and its value is based upon what happens/the outcome of said instrument.
Deposit
The amount required in order to open a trade. In spread betting, this will be the initial amount to cover your position, and not necessarily the amount you can potentially loose.
Dividend
Portion of a companies profit that is paid back to its share holders. Spread bettors do not receive this dividend on their positions.
Double Dip
When a market, instrument or economy falls for the second time after briefly recovering from a previous fall.
Down bet
Speculating against an instrument, also known as going short (selling).
ECB
European Central Bank.
EPS (Earnings Per Share)
Earnings Per Share is an often considered one of the most important factors when calculating a companies value, although there are many other factors to consider. Earnings Per Share is calculated by dividing the company's net income by the number of ordinary shares in circulation.
Equities
Usually refers to shares (ownership) within a company. Holding shares gives you the right to a dividend if paid and also voting rights within the company. Spread betting does not give you any of these, as you never own the stock at any point.
Euribor
The interest rate at which European banks lend money to one another. This rate however will have further reaching effects on items such as mortgages and loans.
Eurodollar
Foreign deposits of US Dollars (help outside the US and therefore not subject to the strict regulation of the US). You can speculate on the Eurodollar for short term US interest rates.
Ex-Dividend
Before a share pays out a dividend, it will go 'ex-dividend'. This is the first date after which the dividend to be paid is declared, and in which time any new purchasers of the stock will not be entitled to the dividend. For example, a share could go ex-dividend in June, with the dividend being payed out in August. Any investors purchasing shares in this time will not receive the dividend for August.
Expiry Date
The expiry date of a futures contract. Essentially this is the date your spread bet will end.
Expiry Price
The price at which your spread bet will settle at if left to run until the expiry date.
Exposure
How much money you could potentially lose given all your open positions (with stop losses taken into account). Due to the nature of spread betting this can often be quite high, especially if trading on a lot of margin. Always ensure you have enough to cover your exposure should you ever be called upon to do so. For example, if you had a £10 long position on a company at 347p with no stop loss, your exposure would be 10 x 347 = £3470. This would of course only happen if the company went bust / into administration.
Fiscal Policy
Fiscal policy is the means by which a government can influence the economy, whether it is to curb inflation or encourage growth. This can include a variety of measures including a change in income tax and public spending. Fiscal policy is slightly different to Monetary Policy.
Fixed Income
Another name given to the bonds market.
Forex (FX)
Forex or even 'FX' as it is sometimes referred to stands for Foreign Exchange. Forex spread betting would involve betting on the rise or fall of certain currencies against one another.
FSA
Financial Services Authority. The current independent regulator of financial services within the UK. All spread betting sites you visit should be regulated by the FSA.
FTSE 100
An index of the UKs 100 largest companies by market capitalisation.
Futures
A 'future' is contract for a financial instrument (commodity, stock, etc.) which must be purchase and sold by the buyer and seller respectively for the predetermined price on the agreed date of the contract.