A lot of spread betting newcomers have the bright idea to leave their trade open until the market moves in their favour. It’s not an absurd notion; the market fluctuates, and in many cases holding a position will eventually pay off. But there’s two reasons this strategy is flawed.
The first flaw is that holding a sunken position can lead to a significant loss if the market doesn’t turn back. This is especially true when a sizeable per-point or per-pip wager has been placed. The second problem is that spread bets do not remain open indefinitely.
All spread bets have expiration dates. The time the trade is automatically closed will come at one of two times: when the current trading session concludes or when the quarter ends.
If the expiration comes when the trading session concludes, a spread betting position will end when the market closes. If the spread bet remains open until the end of the quarter, it will close at the end of March, June, September or December, depending on when the wager was placed.
Technically you cannot hold a position when a spread bet expires, but there is a loophole. If you wish to maintain a position that is ending, you are able to execute a rollover. This action involves closing and immediately reopening the position.
If you roll over a spread bet set to expire at the end of the trading session, it will be valid until the end of the next trading session. If you roll over a quarterly spread bet, it will be valid until the end of the following quarter.
The reason there’s an expiry date on spread bets is twofold. The first reason is because spread betting is classified as a form of gambling and therefore requires an eventual outcome. If you think about other forms of betting, like a sports wager, there is always an end date no matter how far away.
The second reason is because spread betting brokers don’t typically charge money to execute a spread betting transaction. Instead, they make money in the spreads themselves. But if you were to take a position indefinitely while using leverage, you’d basically be borrowing money without a date in which you needed to pay it back. When a spread bet is rolled over, interest is charged by the broker. This enables the broker to recover some of what they’ve lent in the event the bettor extends their position.
Yes. You are able to close a spread bet whenever you wish. The expiration date of a spread bet is merely the last time you can close it.