FTSE / DAX Differential

FTSE / DAX Differential

Guide to FTSE 100 / DAX 30 differential spread betting.

Where Can I Trade on Differential Spread Betting Markets?
What are Differential Markets?
Where Can I find Differential Spread Betting Charts?
How to Spread Bet on the FTSE 100 - DAX 30 Differential

Where Can I Spread Bet on Differential Markets?

You can currently spread bet on differential spread betting markets with:

What are Differential Markets?

Differential markets simply compare the price difference of two markets.

A few of the most traded differential markets are:

Considering an example, if the FTSE 100 is priced at 5925 and the DAX 30 is at 7025 then the difference between them is 1100. As a result, a spread betting firm like Financial Spreads might offer a FTSE 100 - DAX 30 differential market of 1098.0 - 1102.0.

This would mean that Financial Spreads’ account holders could spread bet on the differential to rise higher than 1102.0 or fall lower than 1098.0.

Thinking of this another way, this differential market is a way of trading the relative strength of the FTSE 100 index versus the DAX 30 index.

If you think that the FTSE 100 index will perform better than the DAX 30 index you could decide to spread bet on the differential market to decrease. Likewise if you think the DAX 30 will perform better then you can speculate on the differential to increase.

Differential markets are the same as buying one of the markets and selling the other, although with a differential trade:

You only need one trade which makes your overall position easier to manage
If you made two opposing trades the effective spread would be wider. A single differential trade offers spread betting account holders tighter spreads.

Please note that differential futures markets are either quarterly or monthly and so they have a closing date. The example considered above uses a ‘June’ market and, therefore, if you haven’t already closed your spread bet before the appropriate closing date, any open positions will be settled in June. Please see the spread betting example below for more information.

Where Can I find Differential Spread Betting Charts?

You can get differential spread betting charts with spread betting companies such as Financial Spreads.

As with all charts from Financial Spreads, you are able to alter the chart settings to view the data over a variety of different timescales such as ticks, minutes, hours, days and so on. They have also provided a variety of technical analysis options to help your research of the financial markets.

Sample Stock Market Index Differential Chart

How to Spread Bet on the FTSE 100 - DAX 30 Differential

As with a lot of financial markets, you are able to spread bet on differentials, such as the "FTSE 100 - DAX 30 differential", to either rise or fall.

At the time of writing the DAX 30 is priced at 7025 and the FTSE 100 is at 5925.

Looking at Financial Spreads, they are currently showing the FTSE 100 - DAX 30 (June) Differential market at 1098.0 - 1102.0. As a result, an investor can spread bet on the FTSE 100 - DAX 30 differential:

Finishing higher than 1102.0, i.e. the DAX 30 will perform better, or
Finishing lower than 1098.0, i.e. the FTSE 100 will perform better

On the closing date for this 'June' market, 17-Jun-11.

Whilst placing a spread bet on the FTSE 100 - DAX 30 differential you trade in £x per point. So, if you decide to invest £6 per point and the FTSE 100 - DAX 30 differential moves 4.0 points then that would alter your bottom line by £24. £6 per point x 4.0 points = £24.

FTSE 100 - DAX 30 Differential Spread Betting Example

Now, if we think about the spread of 1098.0 - 1102.0 and make the assumptions that:

You have completed your research of the index markets, and
Your research leads you to feel that the DAX 30 will outperform the FTSE 100 so the FTSE 100 - DAX 30 differential will finish above 1102.0 by 17-Jun-11

Then you might buy a spread bet at 1102.0 for a stake of, for example, £3 per point.

So, with such a trade, you would make a return of £3 for every point that the FTSE 100 - DAX 30 differential moves higher than 1102.0. Nevertheless, such a bet also means that you will lose £3 for every point that the FTSE 100 - DAX 30 market goes lower than 1102.0.

Put another way, should you ‘Buy’ a spread bet then your profit/loss is calculated 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.

With that in mind, if, on the closing date, the FTSE 100 - DAX 30 differential finished higher at 1146.1, then you would make a profit:

Profit = (Settlement Price - Opening Price) x stake
Profit = (1146.1 - 1102.0) x £3 per point stake
Profit = 44.1 x £3 per point stake
Profit = £132.30 profit

Trading differentials, whether by financial spread betting or otherwise, can go against you. In this case, you wanted the market to rise. Of course, the differential can also decrease.

If the FTSE 100 outperformed the DAX 30 and the FTSE 100 - DAX 30 differential fell, settling at 1063.4, then this means you would end up making a loss and losing money on this trade.

Loss = (Settlement Price - Opening Price) x stake
Loss = (1063.4 - 1102.0) x £3 per point stake
Loss = -38.6 x £3 per point stake
Loss = -£115.80 loss

Note: FTSE 100 - DAX 30 June Differential market accurate as of 30-Mar-11.

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