Spread Betting - Introduction

Spread betting is a combination of investing, trading, and betting. Spread bets are available in a variety of financial markets. These markets include stocks, bonds, indices, commodities and more.

A spread bet is essentially a directional bet on any particular market. The spread is the commission that is charged by the spread betting firm in order for you to be able to trade. Essentially the spread is wrapped around the actual market price so that the market price is the mid-point between the buy and the sell price, known as the spread. It is up to a trader to speculate if the price will go up or down. If the trader thinks the market will rise he buys the high number, called going long. He sells the low number if thinks price will decrease, called going short.

Spread Betting Market

In traditional investing, individuals purchase shares of something. Shareholders can only make money if the market price increases. Stock shares purchased must be paid for at the time of purchase.

In spread betting, nothing is owned and one can put up a percentage, known as margin or deposit. This percentage is a portion of the initial wager of a bet.

Spread bettors can profit in a declining market as spread betting offers the ability to short a market and profit from price declines. This means a trader can make money even in poor economic times, whereas the traditional investor who only buys and holds shares is at the mercy of the economy.

UK Spread Betting Companies

Spread betting companies have been around for about thirty years. These betting companies offer spreads to traders and investors. Additionally, many offer seminars to educate and inform traders.

Software has even been developed to assist people in getting started. Spread betting companies can set up stop losses to limit the losses and the trader can easily adjust these. Spread bets can be closed at any time or run until expiry dates, at which point the trader has the option of closing out the trade or rolling the trade over into the next contract.

Spread betting has a big advantage over traditional investing. Spread bet earnings are exempt from stamp duty and capital gains tax in the UK. Many spread betting companies have markets available 24 hours a day. These markets are opened even after the traditional market closes. In essence, spread betting is the 21st century form of investing. It allows trading for everyone, including those that have fairly limited trading capital.

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