Index Betting Today the FTSE 100 Index is say 6300 and Mrs C believes it will rise in the next 2 months to around 6500. She calls for a quote on January 3rd for the March FTSE price. The expiry date is March 1st. The quote she is given is 6315-25. She decides to buy £10 per point. So she goes long at 6325. Result 1 Mrs C buys £10 at 6325 and no guaranteed stop-loss. In approximately 2 weeks time after a strong move in the market the FTSE index price is 6400-6410. Mrs C reviews her position. She decides to take the profit. Profit   Mr C long at 6325 Price 2 weeks later 6400   Difference +75 Result +75 x £10 stake = £750 profit      Result 2 In approximately 2 weeks time after poor market conditions the FTSE index price is 6240-6250. Mrs C reviews her position. Mrs C decides to take the loss. Loss   Mr C long at 6325 Price 2 weeks after 6400   Difference -75 Result -75 x £10 stake = £750 loss     Result 3 Mrs C has decided to buy a guaranteed stop-loss at 6300 at the same time that she places her bet. She buys the market at 6325 +5 which is the premium charged in this case for the guaranteed stop-loss. This premium varies and depends on the types of bet, the time value and volatility of the particular instrument. So her actual long position (buy) is at 6330. Unfortunately a week later the market falls to 6000. Loss   Mr C long at 6325 + 5 (GSL*) Position closed out at 6000 but guaranteed stop-loss 6300 Difference -30 Result -30 x £10 stake = £300 loss   *Guaranteed stop-loss So despite a large fall in the market, Mrs C has lost no more than she would have done if the market had only fallen to her stop-loss at 6300. She has paid a type of insurance policy, the extra 5, in order to ensure that her losses are limited to £ 300. Result 4 Mrs C runs the position to expiry and has no guaranteed stop-loss. The expiry price is 6350. Profit   Mr C long at 6325 Price of XYZ on Mar 1st 6350 Difference +25 Result +25 x £10 stake = £250 profit     Result 5 Mrs C runs the position to expiry and has no guaranteed stop-loss. The expiry price is 6000. Loss   Mr C long at 6325 Price of XYZ on Mar 1st 6000 Difference -325 Result -225 x £10 stake = £3250 loss     The only difference between Result 3, a loss of £ 300, and Result 5, a loss of £ 3250, is due to the guaranteed stop-loss.   Copyright 2000 everythingexplained.com for  spreadbettingexplained.com