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Important Financial Decisions
Financial Spread Betting Trading
Spread betting is sometimes known as spread trading to give it a more respectable air. Nevertheless, it is still gambling because you are placing a wager on how something or someone will perform. It's not just a case of picking a winner because you not only bet on what will win or lose but by how much.
Spread betting originated in the US in the 1940s where gamblers wagered on sporting events, betting that the difference in scores between two teams was more or less than that set by a bookmaker. It became popular in the UK in the 1980s but here is more about gambling on the performance of the financial markets.
Some people claim spread betting is an alternative to conventional dealing in shares, foreign exchange or commodities. When you spread bet, you never actually own any of the financial instruments, you are simply gambling on the way the price will move and by how much. One advantage over share dealing is that the tax position is much better - there's no capital gains tax, no stamp duty and no income tax providing you can prove it's not a source of income that is your main means of support.
Spread betting is not handled through a stock exchange and so is regulated less. However, contracts are with market making companies that are regulated. Financial spread betting is regulated by the Financial Services Authority.
The way spread betting works is that, if a share has a particular bid/offer price, you gamble that it will either go up or down. You wager a set price per point and so stand to win the amount of your bet every point the share price moves in the direction you predict, or lose the same amount if it goes the opposite way.
Clearly, if the share price moves a long way, you can win or lose a considerable amount. You can set a stop loss to limit the amount you lose or a stop win to close the bet and take a profit. You'll need to have an account set up and money deposited to cover any losses.
Spread betting has resulted in large fortunes being won and lost. However, a report indicates that only 20% of spread betters win in the long term.
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