The “spread” is the difference between the buy and sell costs. First created by IGIndex to trade Gold in the 70s it was used without having to actually purchase large physical amounts of metal. Simply put, financial spread betting is a tax free alternative to conventional trading! But I do believe it’s only tax free in the United Kingdom.
As with everything else - this industry flourished quite a bit because of the online aspect, although it simply cannot go to the mass market because of the somewhat confusing facets involved in something like this.
This isn’t just regular betting - anyone can learn tat even someone like me! But with spread betting the rules are a little more confusing and spread betting is also a “high risk” method that should only be utilized by people that can actually afford to lose (if they do lose).
Not to turn anyone off from this concept but with any type of betting there is always one rule that is the same. Don’t bet more than you can afford to lose. Remember this is high risk.
So if you need money quick and you need your chances to be probable - this probably isn’t a good choice for you. Go play poker or something else that can guarantee you a higher winning percentage and a lower risk of losing!
Okay so how does something like this work exactly? Well, if you expect a monetary value to grow, you would buy into it, or go long on the market. Likewise, if you sell, then you expect the price to go down.
The positions you buy from are at the upper or lower edges of the spread. For example, if you bought GBP10 a point on the FTSE at a spread of 4050-4055, then any effort of the FTSE above 4055 puts you in profit, GBP10 for every point traveled. Instead, if the
FTSE moved lower to 4040, then you will be liable for 15 points. With a lot of other betting techniques you either place bets over a short period of time or a long period of time. Whereas with spread betting you actually have a choice to place the bet for one day on up to a few months, it really depends on you and the market that you select.
Okay so if all of this is so confusing and so high risk, why do so many people do it? Its simple. It’s all about the money. The stakes might be high but so is the ROI (return on investment). This is because the bet is per point and the amount of points are quite large in some of these cases. If you can afford to “play” at this, then awesome - you should give it a go. If you cant, then I wouldn’t bother. In any case I think it’s important to study up on this. Don’t just jump right in!
This Author is a huge fan of Spread Betting
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