How Long Do Spread Bets Last? What's the Time Limit? Do They Expire?

The simple answer is that you can create whatever duration of spread bet you want. Some spread bets only last a few hours whereas others last as long as you are willing to fund them. The duration of the bet depends on what type of bet you are placing. You must make sure you have the correct type of bet or you can get yourself into trouble. For example if you are betting that XYZ Corp (a fictional company) is going to have a very bad Q4 you have to ensure that your bet last up until at least the end of Q4.

So let's take a look at some different bet types but first we need to see what actually happens when a bet expires.

So, What Happens At Expiration? 

To understand the implications of a spread bets expiration you need to understand exactly what happens to your bet when it expires (if it does actually expire). Basically the spread bet is closed and profits and losses are credited/debited unless you pay for a rollover

You may close out your bet early but once it expires it will be settled whether you like it or not. With bets that expire you have to not only be right in your analysis but right at the right time. If the shock event happens 1 second after expiration your not going to profit from it. Though, bets can be extended with roll-overs but this incurs a fee. What you have to remember about expiration is this:

"You have to learn to weigh up extra costs of longer term positions against the time frame required for your thesis to come true". 

Daily Funded Bets (DFB) or Rolling Daily Spread Bets  

These are typically the most popular option with traders. These bets don't expire for a very long time - typically 5 years. Essentially the bet lasts as long as you are willing to fund it or around 5 years. If you don't fund the bet (i.e. you ignore a margin call) your position will be forcibly closed. The longer the bet is open the more financing it will require. If you are long you will have to pay an interest rate on your entire position so the longer you hold the trade the more you will have to pay in charges. For short bets you may get a little cash because interest rates are so low but you will have to pay a borrow charge which can be very expensive for some stocks (try borrowing something like Naibu Plc).

The advantage of this type of bet is that it gives you a longer time for your thesis to come true. For example if you decide that XYZ Corp is overvalued and you short it, the over-valuation may continue for some time. Hence you will need to keep a bet on for a long time to wait for the market to agree with you. However, if you bet too long XYZ Corp may grow into its valuation. Ask Lucian Miers about his ASOS short at around 600p in 2010 (ASOS went as high as 6000p or £60 per share and grew its earnings such that 600p was not at an outrageous valuation by 2015).

Although from the perspective of most traders DFB don't expire (they are closed out long before that) it is important to note that all bets have to end sometime. The broker can't let you finance losing positions forever. You have to realise losses sometime.

Quarterly Spread Bets

Unsurprisingly these expire at the end of a quarter (the end of March, June, September or December). It is possible to roll over these bets but this will incur a roll-over charge. Although the financing is cheaper on quarterly bets they become very expensive longer term positions due to roll over charges.

Daily (or Intraday) Spread Bets

These are very similar to the quarterly spread bets however they expire at the end of the trading day. These are very expensive compared to DFB for longer term positions. In the short term they are very cheap due to the very tight spreads which makes these highly popular with day traders.