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financial spread betting — Sun, 05 Sep 2010 17:12:18 +0000

Financial spread betting is a leveraged tool that gives investors the opportunity to trade the financial markets without ever taking physical ownership of the underlying instrument. This means that the trader/investor can speculate in the direction of any financial instrument, whether it is specific shares, currencies, commodities or indices without ever owning them. In the financial markets there are standard contract sizes. For example for the FTSE 100 index contract the standard market size is £10. With financial spread betting the investor nominates his own stake size, for example £2 per point. The bet is settled as the difference between the purchase and the sell price.Financial Spreads is appealing to ever greater numbers of investors for several reasons, not least of which is the absence of capital gains tax on profits (unlike conventional share trading, where CGT applies to trading gains in many countries), and the lack of stamp duty on transactions (most interesting in the UK; strictly speaking, the transaction is a bet, rather than an investment – hence the name.) However, by its very nature financial spread betting is more risky than traditional, fixed odds betting, or conventional traditional share trading, where participants are usually a little more protected. If you judge wrong, you are likely to lose a great deal in the absence of a stop loss and any losses made on a spread bet cannot be offset against capital gains on ordinary investments.The costs associated with financial spread betting are included in the spread (the difference between the bid and the offer price). Therefore the wider the spread, the more you pay to trade. So when considering a company to spread bet always compare the spread. The good news about the spreads is that these are generally getting tighter due to increased competition and explosive growth as investors are beginning to realise the advantages of financial spread betting; thus making the system more efficient.

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