Spread betting example 1: buying ABC Company shares
In this example, ABC Company is trading at 100/102 (where 100 is the sell price and 102 is the buy price). The spread is 2. Let's assume that you want to open a buy position (go long) at £2 per point because you think the price of ABC Company will go up.
Let's say that our margin rate for ABC Company is 5%, which means that you only have to deposit 5% of the total position's value (position margin) to place your trade. Therefore, in this example, your position margin will be £10.20 (5% x (£2 x 102)).
Remember that if the price moves against you, it is possible to lose more than your outlay of £10.20, as losses will be based on the full value of the position.