Example 1: buying the FTSE 100
The FTSE 100's underlying market value is 7114, with a one-point spread applied by IG. That means you can sell it at 7113.5, or buy at 7114.5.
You anticipate that the Bank of England (BoE) will be lowering interest rates soon, and that the FTSE 100 is set to rise. You buy £10 per point at 7114.5.
Spread betting is a leveraged product, meaning you only need to cover the margin as opposed to the full value of the trade. Margin is calculated by multiplying the margin factor for the market you are trading with your total exposure.
Say that the FTSE 100 has a margin factor of 0.5%. Your margin would be 0.5% of the total size of your trade. You’re trading the FTSE 100 at £10 per point, so your total trade size is £10 x 7114.5 = £71,145. That’s assuming that you haven’t attached a guaranteed stop, which could change your margin requirement.
0.5% of £71,145 is £355.73, so that’s how much you need to deposit as margin.