What
is Financial Spread Betting, and Why Should
I be Interested?
First
of all, it is
important to be aware that financial spread betting and sports
spreadbetting
are essentially two
different
things, although they do share certain characteristics
and
principles. But in order to understand what financial spread
bet
companies are
offering, it is worth being aware of what sports spreadbetting is, in a
simpler to
understand case study.
Let's
imagine that a
premiership football team are taking on a little known local football
team.
Clearly the bookies would find that very few people would bet on the
little
local team, making the betting system very uneven, and offering very
miserly
odds which wouldn't make anyone very much cash.
Sports Spreadbetting evens
up
the odds to a good deal by offering people the chance not to bet on who
will win,
but on what the difference will be between the scores. Let's say that
the
bookie offers a spread bet of five points.
This means that you can
either bet
on the premiership team beating the local team by five or more goals,
or on the
local team losing by less than five goals.
So the final score comes
in and the premiership team score 9 and the local team scores 5. For
those who
bet on the local team team, the spread of 5 points added to their score
of 5
makes a total of 10, which beats the premiership team's score, which
means that
even though you may have bet on the team which lost, by using spread
betting
you still win.
It's a little like that in a
financial
spread trade, because you can still win big profits even
when the
financial markets are going down. You can also choose to spread bet
over a
short period of time, or over longer periods, and you can even choose
to end
your bet early if things look good but you suspect they're about to
turn
around.
Financial
Spread Bet
What
spreadbetting
companies allow you to do is to trade, not just on the fact that stocks
or
shares will rise, but on how much they will change, regardless of the
direction.
By betting a certain amount of money per point
difference you can
then make a significant return if you decided to bet above or below the
markets
current value. This also means that you don't actually have to own
anything.
With a financial spread bet you don't actually own any commodities or
securities such
as stocks or shares – you are betting on the change in the market, not
on the
market itself.
This also means that there are huge tax benefits
to be enjoyed, because you are not buying the underlying assets there
is no Capital Gains Tax to worry about, and
no Stamp Duty, making it a tax free way to make significant financial
gains
quickly. However, there is a word of warning which all reputable
financial
bet providers should make clear, and that is that
with a
spread bet
it is possible to lose more than your initial stake. Therefore it
carries a big
risk, and isn't for the fainthearted.
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Sports Spreadbetting evens
up
the odds to a good deal by offering people the chance not to bet on who
will win,
but on what the difference will be between the scores. Let's say that
the
bookie offers a spread bet of five points. 