Financial spread betting lets you gain exposure to the performance of key markets, without having to put up the full value of the transaction as you’re trading on margin.
So you can profit from market moves while only putting forward a margin deposit as collateral, this can be as low as 10% of the contract value.
As your transaction is a bet, your profits are free from UK capital gains tax and income tax, and trades on individual shares are free from stamp duty. Those outside the UK may also be able to Spread Bet however the same tax advantages do not apply.
One of the major advantages of financial spread betting over conventional share trading is that it is just as easy to go short as it is to go long. That is, you can profit even when a particular market is falling, you simply open a SELL/DOWN bet rather than a BUY/UP bet. Other methods of shorting shares are often expensive and not easily available to smaller private traders.
Financial Spread betting can be used to trade from less than one minute up to 12 months and can be used to cover a range of different investment strategies. For instance, you could use spread bets to hedge the value of your existing holdings, Hedge against a currency exchange movement or to speculate on market volatility. You also have the flexibility to respond quickly to any changes in market conditions as most Financial Spread Betting companies are open 24 hours a day.
As the popularity of Financial Spread Betting has grown so have the number of Financial Spread Betting Brokers, as traders this is good news as the competition has lead to better products, lower spreads and smaller bet sizes.
Another advantage is the ability to trade in your base currency for instance sterling, even though the market may be traded in US Dollar for example Gold or Oil, this means you don’t have to worry about exchange rates.
Example of a Financial Spread Bet Gold
Let’s look at placing a trade on Gold. We can trade via phone, Internet and many cases now we can trade with a mobile phone such as an iPhone.
All spread bets have an expiry date; we don’t have to hold the bet until this date.
In this case April Gold which is currently quotes at 945.0/946.0 The first price is the price we sell at the second is the price we buy at. We think Gold will go up so we buy £100 per point at 946.0.
One important factor in trading is to always protect your downside; however sure you are you need to have a safety net, in this case a Guaranteed Stop loss. We will place our stop 20 points away, so if Gold hits $926 then the bet will be automatically closed out. This means that our downside is know ahead of time, our profit is unlimited but our risk is strictly limited to 20 X £100 so £2,000.
A few weeks in to the trade we see Gold is now trading at 1075/1076, we decide to take our profits and close the bet, so we now sell at 1075.
So to recap Bought £100 at 946.0 sold £100 at 1075 the difference is 129 points X £100 will £12,900 profit.
We could have easily done the reverse and profited from a down move. Also notice whilst Gold is traded in US$ we are using £ as our betting currency.
To Summaries
Financial Spread Betting can be used to profit from Rising or falling markets. It’s possible to trade a diverse range of markets form one account. Bet sizes can be smaller than traditional futures brokers. Traders can use guaranteed stop loses to protect against unlimited losses, yet profits can be unlimited. It is still important to realize that Spread Betting is a higher risk investment and it is advisable to learn and practice before placing real trades, also only trade with risk capital.
Financial spread betting lets you gain exposure to the performance of key markets, without having to put up the full value of the transaction as you’re trading on margin.
So you can profit from market moves while only putting forward a margin deposit as collateral, this can be as low as 10% of the contract value.
As your transaction is a bet, your profits are free from UK capital gains tax and income tax, and trades on individual shares are free from stamp duty. Those outside the UK may also be able to Spread Bet however the same tax advantages do not apply.
One of the major advantages of financial spread betting over conventional share trading is that it is just as easy to go short as it is to go long. That is, you can profit even when a particular market is falling, you simply open a SELL/DOWN bet rather than a BUY/UP bet. Other methods of shorting shares are often expensive and not easily available to smaller private traders.
Financial Spread betting can be used to trade from less than one minute up to 12 months and can be used to cover a range of different investment strategies. For instance, you could use spread bets to hedge the value of your existing holdings, Hedge against a currency exchange movement or to speculate on market volatility. You also have the flexibility to respond quickly to any changes in market conditions as most Financial Spread Betting companies are open 24 hours a day.
As the popularity of Financial Spread Betting has grown so have the number of Financial Spread Betting Brokers, as traders this is good news as the competition has lead to better products, lower spreads and smaller bet sizes.
Another advantage is the ability to trade in your base currency for instance sterling, even though the market may be traded in US Dollar for example Gold or Oil, this means you don’t have to worry about exchange rates.
Example of a Financial Spread Bet Gold
Let’s look at placing a trade on Gold. We can trade via phone, Internet and many cases now we can trade with a mobile phone such as an iPhone.
All spread bets have an expiry date; we don’t have to hold the bet until this date.
In this case April Gold which is currently quotes at 945.0/946.0 The first price is the price we sell at the second is the price we buy at. We think Gold will go up so we buy £100 per point at 946.0.
One important factor in trading is to always protect your downside; however sure you are you need to have a safety net, in this case a Guaranteed Stop loss. We will place our stop 20 points away, so if Gold hits $926 then the bet will be automatically closed out. This means that our downside is know ahead of time, our profit is unlimited but our risk is strictly limited to 20 X £100 so £2,000.
A few weeks in to the trade we see Gold is now trading at 1075/1076, we decide to take our profits and close the bet, so we now sell at 1075.
So to recap Bought £100 at 946.0 sold £100 at 1075 the difference is 129 points X £100 will £12,900 profit.
We could have easily done the reverse and profited from a down move. Also notice whilst Gold is traded in US$ we are using £ as our betting currency.
To Summaries
Financial Spread Betting can be used to profit from Rising or falling markets. It’s possible to trade a diverse range of markets form one account. Bet sizes can be smaller than traditional futures brokers. Traders can use guaranteed stop loses to protect against unlimited losses, yet profits can be unlimited. It is still important to realize that Spread Betting is a higher risk investment and it is advisable to learn and practice before placing real trades, also only trade with risk capital.
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