How to Spread Bet Following FOMC Statement
LONDON, August 2, 2012 /PRNewswire/ –
On Wednesday evening, the Federal Open Market Committee (FOMC) announced that they
would not be introducing any new QE measures this month to help boost the flailing US
economy, while leaving interest rates unchanged at historic lows.
Following the announcement, we look at what effect this has had on the markets and how
you can take a position with a spread betting account
[http://www.cityindex.co.uk/spread-betting ] from City Index.
FOMC Leave Policy Unchanged
Market expectations were for the FOMC to extend the low rate guidance until at least
late 2014, whilst refraining from announcing QE3 in August.
As expected, the FOMC held back on fresh QE action to stimulate the US economy, while
keeping rates steady at current levels.
A significant change in the statement by the FOMC, however, was a downgrade in the
economic growth outlook.
In the August statement, they said ‘economic activity decelerated somewhat in the
first half of [the] year’.
The latest statement recognised ‘further’ signs of improvement in the housing sector,
but said that it remained ‘depressed’.
How will you Trade following the FOMC Announcement?
Following the FOMC announcement, how will you plan your trades?
Below, we look at how you can take a position on the future price movement of the Wall
Street index with a City Index spread betting account
Spread Betting the Wall Street Index
In the following spread betting example, we look at trading the Wall Street index
through the City Index trading platform – available to clients online and through a
sophisticated mobile trading app [http://www.cityindex.co.uk/trading-platform ].
In this example, let us say that you speculated that the Wall Street index would fall
following the FOMC statement at 19:05 BST, Wednesday, 1 August.
Let us say that through the spread betting platform, the Wall Street index price was
trading at 13056.5/13057.5 (the sell price/buy price) an hour prior to the statement.
You decided to go short and sell at the current sell price of 13056.5. You sell with a
stake size of $10 per point.
Wall Street Index: Falls
Following the statement, let’s say the Wall Street index price falls to
Deciding to cash in your profits, you now close your trade by buying back your stake
at the new buy price of 12952.5.
This represents a 104-point fall in favour of your position which, when multiplied by
your $10 stake, nets you a $1040 tax-free profit*.
Wall Street Index: Rises
Alternatively, let’s look at what would have happened had the Wall Street index risen
and moved against your position.
In this example, let’s say that following the statement, the Wall Street index rose to
13159.5/13160.5, putting your spread bet into a loss position.
Deciding to take your loss, you now choose to close your trade by buying back your
stake at our new buy price of 13160.5.
This represents a 104-point rise against your position which, when multiplied by your
$10 stake, nets you a $1040 loss.
Remember, spread betting is a leveraged product which can result in losses greater
than your initial deposit. Ensure you fully understand the risks involved.
Start Financial Spread Betting
To start spread betting across a range of trading platforms – including the City
Trading mobile application – you can apply for a spread betting account
[http://www.cityindex.co.uk/spread-betting/start-spread-betting.aspx ] with City Index
through their website: http://www.cityindex.co.uk
Read More Spread Betting Tips
If you found this article helpful, you may want to read more just like this. You can
access a range of free spread betting tips [http://www.cityindex.co.uk/spread-betting-tips
], guides and articles through the City Index website.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives,
and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month in over 50
countries. We provide access to a wide range of instruments including margined foreign
exchange, CFDs and, in the UK, financial spread betting
We constantly look to improve the performance of our platforms and expand our range of
services. The result is our customers benefit from innovative trading tools with
transparent pricing, competitive spreads, and a high standard of customer support. Visit
http://www.cityindex.co.uk for details.
SOURCE City Index