Guide to Spread Betting on Cotton
Where to Spread Bet on Cotton?
You can financial spread bet on commodities like Cotton with any of the following firms:
Although note that you can also speculate on commodity markets with other Spread Betting Companies.
Spread Betting on Cotton
As with a lot of financial markets, it is possible to spread bet on commodities markets, such as Cotton, to either rise or fall.
Looking at the Inter Trader website, as of Friday, they were pricing the Cotton July Futures market at $72.63 – $72.85. This means you could spread bet on Cotton:
- Settling above $72.85, or
- Settling below $72.63
On the settlement date for this ‘July’ market, 22-Jun-12.
When spread betting on Cotton you trade in £x per $0.01. So, if you choose to risk £2 per $0.01 and Cotton moves $0.05 then that would alter your profits (or losses) by £10. £2 per $0.01 x $0.05 = £10.
Cotton Futures Spread Trading Example
If we consider the spread of $72.63 – $72.85 and make the assumptions:
- you’ve done your analysis of the commodities futures markets, and
- it leads you to feel that the Cotton market will finish above $72.85 by 22-Jun-12
then you might decide to buy a spread bet at $72.85 for a stake of, for the sake of argument, £1 per $0.01.
So, you win £1 for every $0.01 that Cotton rises higher than $72.85. Of course, it also means that you will make a loss of £1 for every $0.01 that the Cotton market decreases below $72.85.
Put another way, should you buy a spread bet then your profits (or losses) are found by taking the difference between the closing price of the market and the price you bought the spread at. You then multiply that difference in price by the stake.
Subsequently, if, on the expiry date, Cotton finished at $74.05, then:
Profit / loss = (Closing Price – Opening Price) x stake
Profit / loss = ($74.05 – $72.85) x £1 per $0.01
Profit / loss = $1.20 x £1 per $0.01
Profit / loss = £120 profit
Trading commodity markets, whether by Commodities spread trading or otherwise, is not simple. In this case, you wanted the commodity to rise. Nevertheless, the futures market could fall.
If Cotton decreased and settled at $71.79, you would end up making a loss on this market.
Profit / loss = (Closing Price – Opening Price) x stake
Profit / loss = ($71.79 – $72.85) x £1 per $0.01
Profit / loss = -$1.06 x £1 per $0.01
Profit / loss = -£106 loss
Note: Cotton July Futures commodities market quoted as of 08-Jun-12.
Cotton Spread Betting – More Details
For more information about speculating on Cotton, also see Cotton Spread Betting.
Spread Betting Account Offers
For a detailed look at the spread sizes, spread betting markets and account services offered by a variety of spread betting firms please see Spread Betting Account.
If you are thinking about opening a financial spread betting account then for the latest spread betting offers also see Spread Betting Offers.
Financial spread betting is a leveraged investment product, it involves a high level of risk to your capital and losses can exceed your initial stake. Ensure that spread betting fits your investment needs as it may not be appropriate for all classes of investor. Always ensure that you only spread bet with funds that you can afford to lose. Before trading, please make sure that you are fully aware of the risk involved and seek independent advice if appropriate.
June 9, 2012 No Comments