A spread bet is a type of investing in the financial market using financial instruments on the stock exchange. Many people call this investing whilst others consider it gambling. Regardless of what it is called, a spread bet is a way to make money on the prices of the stock market.
A spread bet begins with choosing a financial instrument, such as the share of a company, and then finding a quoted spread with a spread betting firm. A spread is a price range of what the spread betting firm believes the future price of the share will be. A trader may place a spread bet on this quoted spread indicating one’s belief the price will be higher or lower than that. The trader will include a stake size when placing one’s spread bet.
A spread bet had gained popularity because in this type of investing a trader may make money on the stock even if prices decline. This is because the bet is a wager on the trader’s prediction of which way the market price will move. This could be either direction, up or down. Another reason for its popularity is that all profits are tax free.