Stock Indices FAQs
Here are answers to some of the questions we are most commonly asked about spread betting on stock indices. If you can't find what you're looking for here, please refer to the bet details.
What are stock indices?
A stock index is a measurement of the combined value of underlying stocks within a section of the stock market.
There are a number of different types of stock index, including global, national and sector-specific indices. They move higher or lower based on investor reactions to a number of factors, such as a company reporting updates or economic performance announcements. A change in the value of any individual stock in an index will be reflected in a change of the overall value of that index.
We offer a huge range of indices to spread bet on, including the FTSE® 100, Wall Street and Japan 225.
Who spread bets on stock indices?
Depending on what they are looking to achieve, people bet on stock index movements in different ways. Traders looking for quick returns will employ short-term strategies, betting on the immediate direction of the market with Daily Funded Bets, while others will take a longer-term view and bet on the value of the index at sometime further away in the future, often a few months ahead.
Spread betting on indices enables you to take a view on a wider collection of stocks rather than simply focussing on the prospects of an individual company’s shares – an index will never go bust or be subject to a takeover bid and your potential risks and rewards are not tied to just one company’s fortunes.
It’s important when spread betting on stock indices to keep up-to-date with the latest financial news and economic developments, as these factors can often affect how the market moves. IG Index offers a comprehensive package of Market Analysis resources, including free analytical tools, expert commentaries and regular economic news updates.
How does spread betting on stock indices work?
Once you know which index you would like to spread bet on, you simply check our current price quotation and either ‘buy’ at the offer price, or ‘sell’ at the bid price.
You can take a short-term view on a number of stock indices with our Daily Funded Bets that are settled against the day’s official closing price for the relevant index. These bets are ideal for taking a position on the immediate direction of prices across a whole market and attract our narrowest dealing spreads.
We also offer bets on a range of contract months that give you flexibility when taking a position on longer-term market moves.
To develop a better understanding of how spread betting on stock indices works, take a look at our detailed examples.
How are the deposits for indices bets calculated?
Every bet involves a corresponding deposit. The deposit requirement for each bet is equal to the bet size multiplied by a Deposit Factor (which you can find on the Indices bet details page).
In most cases our deposit requirements are based on those of the futures exchanges. The exchanges frequently change their deposit requirements, and therefore IG Index reserves the right to change deposit requirements or require new or additional deposit payments without notice. For this reason, the Deposit Factors shown on our bet details page may not be current when you open a bet. Any changes will normally apply to bets already open, as well as to new bets.
In some cases a client may have open two or more bets which are connected in such a way that it is unnecessary to charge full deposits on both. We are not obliged to take account of connections between bets.
Bets denominated in currencies other than sterling normally have a deposit requirement denominated in the relevant currency. In such cases you can, if you prefer, put up sterling; conversions will be made at an exchange rate no more than 0.3% less favourable to you than the current rate.
Placing a Stop Order on a particular bet can result in a substantial reduction in the deposit requirement. The deposit required for a controlled risk bet will normally be equal to the maximum amount you can lose on the bet.
When you have a non-Guaranteed Stop Order to close a bet, the deposit requirement is equal to:
(bet size x Stop distance) + (no-Stop deposit x slippage factor)
The slippage factor is 20% of the normal deposit requirement for indices, forex and all other non-shares markets. See the example below for more details, or visit our Risk Management page for details.
Example
The deposit factor for FTSE® 100 DFBs is 30. Therefore the deposit requirement on a £10 bet would be £10 (bet size) x 30 (Deposit Factor) = £300.
If betting with a non-Guaranteed Stop, the deposit is reduced. Using the above example, the deposit with no Stop is £300. If a Stop were placed 20 points away, the deposit would be calculated as follows:
20 (Stop distance) x £10 (bet size) = £200
£300 (no-Stop deposit) x 20% (slippage factor) = £60
£200 + £60 = £260
What are the advantages of spread betting on stock indices?
- Tight spreads, including a 1-point FTSE® DFB price
- PureDeal platform combines reliability and super-fast execution
- 24-hour trading across a huge variety of indices
- A range of order types that enable you to manage risk and protect profits
- Access to the latest commentary from our experts to help inform your trading
- A comprehensive real-time charting package, which many of our stock index traders rely upon to help their decision making
Learn more about spread betting with our free online seminars