There are more and more spread betting brokers offering options trading online these days.
We’re not talking about evil binary options which are now thankfully banned by the FCA. We’re talking about real listed options on the DJIA(as an example in the image).
Traditional options are generally used as a hedging and limited risk way to get exposure to the markets.
There has been a lot of chatter recently about the market peaking and potentially correcting soon. So, how can you hedge your portfolio with index options as a spread bet.
Three spread betting brokers that offer options:
Typical options offered by spread betting brokers
- Index
- Commodities
- Forex
- Some main market shares
The prices are pretty decent and liquidity is fair. Out of the money, options are generally not that liquid anyway so if they can get a price they will probably quote one on screen for you.
At the money options as a spread bet should prove easier to trade, but of course, the big profits come from buying deeply out of the money puts or calls and waiting for the market to come your way.
Of course, there is a certain amount of time value that will depreciate over time the closer to expiry you get. But if you are buying options your risk and downside are already factored in (if you are fully paid up). Always best to check the margin and your account statement to ensure this is the case.
One important point to remember that if you are writing (or selling) options as a spread bet your losses are unlimited. An option can go to zero, but it also (in theory) has no top end price.
There are many ways to hedge a portfolio using spread betting and buying options is a good tax free strategy.
So if you want to get some fairly decent option prices, take a look at IG or Spreadex and the spreads they offer. Or compare UK options brokers here.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
You can contact Richard at richard@goodmoneyguide.com
