Spread betting is a derivatives product that allows you to trade on the price movements of financial markets including shares, indices, currencies and commodities.
You can use spread bets to speculate on the price movement of shares, indices, cirrencies and commodities irrespective of the diretction of the market. You can go long (buy) and your profits will rise with any increase in price. If you short (sell), your profits will rise with any fall in price. If however, you go long on a price and the stock price falls, you will lose money.
Going Long means when you choose to bet on the price of the stock going up
Going Short is when you bet on the price of a stock going down.
Why is financial spread betting so different from a casino?
Everything is life is a gamble. The main difference in spread betting compared to gambling in a casino is that the broker would rather you win and lose as they off set you bet with shares and CFDs. So the more you bet, the more you win, the better off you and they will be. In a casino the house always wants to win as they don’t profit when you profit.
The Pros of Spread betting vs Trading Shares
An increasing number of traders are looking towards spread betting as an alternative to buying and selling shares. While it is similar to traditional trading, it has some exciting advantages that many are making the most of.
You are no longer limited by falling prices
With traditional trading, you are forced to wait for rising prices of shares in order to allow you to sell them back at a higher price that what you had originally bought them for. While you can make a profit when share values increase, any decrease can be an obstacle for you. Spread betting allows you instead to speculate on any price shift. Regardless of whether share values rise or fall you are still able to assure a profit for yourself due to the fact that you can both “go long” and “go short” – by having a spread bet trade on a rising or a falling share price. However the share prices fluctuate, your profits can still increase.
Another advantage of spread betting is the opportunity to enjoy placing a smaller margin. As spread betting is leveraged, you only need to deposit a small fraction of your total value. This ensures that you have a much greater potential for making a profit than you would with the traditional method of trading.
Enjoy tax free profits
Enjoying tax free profits is certainly one of spread betting’s greatest attractions – this is because current UK laws do not apply Tax on profits made through spread betting (please check with your tax advisor). And as an added advantage, they are also exempt from stamp duty, as spread betting is classed as a betting product.
Trade across a diverse range of markets
If you enjoy exploring a greater diversity of markets, then spread betting may be the perfect approach for you. It allows you to take a position across thousands of shares, indices and global currencies, as well as being able to place trades on commodities, bonds and interest rates. With many markets available 24 hour a day, you can spread bet around the clock, including during the periods when the underlying markets are closed.