I’ve never been in a bookies office, but the idea of spread betting in the comfort of my home offers significantly greater appeal, and there are some websites I can look to find ideas. Spread betting offers a more interesting bet on the difference between two teams’ scores, or the likely total outcome of goals, points or scores in a sporting event, than traditional sports betting.
With the proliferation of online bookmakers, and peer-to-peer or exchange betting sites, you can also make a bet online, potentially against real bettors, rather than bookmakers. But to begin with, it might be more straightforward to get to grips with the basics of spread betting, and find out what you can potentially win (or lose)!
The bookmaker’s interest in spread betting is to encourage people to make a wider range of bets. In the US, this is usually applied to the difference in scores between two football or baseball teams. In the UK, it tends to be applied to the total amount of goals or corners during a football match.
Financial spread betting is a commonly used retail derivative employ to speculate which direction the share price of a stock or commodity index will take without actually owning or purchasing any of the shares. It is now one of the United Kingdom’s most popular methods of trading, and this is not surprising given that any profits are 100% free from stamp duty and Capital Gains and Income Tax. A spread bet is a contract between the client and spread betting company where the bet is based on an underlying financial instrument. Actual ownership of that financial instrument never takes place.
One of the principle reasons for using this tool is to profit from markets such as stocks and shares, bonds, foreign exchange, and commodities such as crude oil and gold, be they in the UK or international markets. Financial spread betting is a great way for smaller investors to trade without committing to a large financial investment.
Unlike bets in bookmakers, there are no fixed odds in spread betting, but instead, a stake is betted on the direction of the market. If the trader bets that the price will rise, this is called ‘going long’, and if the better predicts the price will fall, this is called ‘going short.’ So rather than direct ownership of equities in a company, the trader is betting on which direction he thinks the price will go. Any profit or loss made is determined by the difference in buy and sell prices.
Another advantage of financial spread betting is that it is also possible to make money if the price falls, unlike the more traditional methods of trading. And making profits here is as simple as making profits in a rising market, it simply depends on how far the price has fallen against the price the time the bet is executed.
There are principally two types of spread bets at present. The first is a bet which closes once the markets close, and the second is a bet which will close at the end of a quarterly cycle. Daily spread bets do have to expire at the end of each day but for a small ‘interest’ charge you can roll over these bets into the next trading day or trading cycle.
Benefits of financial spread betting include access to most markets 24 hours a day, on websites such as cmc markets, all markets traded through just one account, and the use of smaller bets. This is attractive for traders who are looking to get in and out of a trade quickly. Another benefit is that there is no commission or fees involved, and all of the costs are included in the bid-offer agreement. With financial spread betting your financial products are all in the same place and under the currency of your choice, pound sterling, US dollar, or euro. This saves you the inconvenience and costs involved in exchanging currencies.
As with all trading and investment, there is an element of risk involved and if the market moves in the opposite direction to your bet, you may lose your money. Research your market and only bet what you can realistically afford. Stop-loss facilities are offered by most financial spread betting companies to help you monitor your funds. These facilities are set up to suit your individual financial requirements but they may not be guaranteed and money can still be lost.