Spread betting

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19. Strategy - taking profits

We've seen how you can close out a bet early to cut losses. The same tactic can be used to crystallise profits.

Using the FTSE 100 example again, suppose you placed a £10 buy bet at 6150 - 6200 on a three month contract (i.e. the bet will expire on 31st March). After two months the spread has risen to 6300 - 6350 but you think that it may fall back in the last month of the contract. You decide to take your profits.

To do this you place a £10 sell bet at 6300 on a one month contract.

Your profit would be:

If the index does fall back in the last month, your decision will have been vindicated. If it continues to rise, you would have made more money by letting your first bet run its course.

Although everyone agrees that it is sensible to cut losses, there doesn't seem to be the same consensus about when you should take profits.

• Some people argue that "you never go broke taking a profit".
• Others argue that the secret to success is "running your profits".

The majority of sensible spread betters take their profits when they are available.

1. What is spread betting? 2. A brief history 3. Spreads on individual equities 4. Spreads on an index 5. Performance spreads 6. Other financial spreads 7. Practical advantages - leverage 8. Practical advantages - going short 9. Practical advantages - hedging 10. Practical advantages - volatile markets 11. Practical advantages - tax 12. Dynamics - think short term 13. Dynamics - the size of the spread 14. Dynamics - upside and downside 15. Dynamics - length of bet 16. Strategy - bet only what you can afford 17. Strategy - cutting losses 18. Strategy - stop losses and limited risk bets 19. Strategy - taking profits 20. Strategy - arbitrage 21. Opening an account 22. Placing a bet and managing your account 23. Regulation 24. Some more tips 25. Conclusion

• Financial Spread Betting
• The Beginner's Guide to Financial Spread Betting