SPREAD BETTING
What is Financial Spread Betting?
Financial Spread betting is one of the most exciting and fastest growing ways of speculating on the movement of an underlying share or index and for many investors it has become a flexible and cost efficient alternative to trading ordinary shares.
How does a Spread Bet work?
A spread bet is a bet on the future movement of an underlying instrument. In basic terms if you believe the underlying instrument is going to rise you place a buy bet, if you believe the underlying instrument is going to fall you place a sell bet.
Unlike ordinary share trading you can befit from falling as well as rising shares or other financial instruments.
A spread betting company will quote you two prices for any underlying instrument a Bid (the price that you can sell at) and a ‘offer' just like you would for a normal equity (the price that you can buy at)the difference between these is known as the spread.
The movement of the underlying instrument is measured in points eg. For equities 1 point = 1 pence for indices usually 1 point = $1 and you can place a bet of any value against every point movement in the underlying i.e. $1 per point, $5 per point or $10 per point etc.
To close a bet you simply place an opposite bet on the specific instrument at the same £ per point. To close a buy bet you sell at the current quote and to close a sell bet you buy at the current quote.
Advantages of Spread Betting
NO Stamp duty
Tax Free Profits: Profits on spread betting are not subject to capital gains tax*
No direct commissions or fees are paid to the spread betting company
We can profit from falling or rising markets They are traded on margin therefore bets can be placed with a relatively small initial outlay
A single account can give us access to far greater range of financial markets. We can limit risks using a ‘Stop Loss’.
The ability to place very small bets, some companies let you place a trade of as low as 1p per point.