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Financial Spread Betting

Type Investment - High Risk
Financial Spread Betting

Financial Spread Betting

Financial Spread Betting


Description

Financial spread betting is a slimmer, hungrier version of traditional share trading. The 'spread' in the phrase financial spread betting refers to the diference in the lower Sell (Bid) and higher Buy (Offer) price quoted by the market making company. The spread is centred around the live (or the estimated future) market price of a financial product.

For example, if the Daily FTSE is trading at 5327 the quote might be 5325-5329. To speculate on a rise, you buy say 10 a point for 5329. If the spread moves up to 5345-5349, you can then sell at 5345, making 160. If the spread moves down to 5305-5309, you could close out your loses by selling at 5305, losing 140.

Financial Spread Betting is an online investment activity, and online accounts are offered by several companies. Most offer a demo account facilty for newcomers, allowing you to build up experience without risking real money.

Why in 100 Best?

Astute spread bettors make money in both rising and falling markets. Gains are free of tax and free from stamp duty. But you can lose substantial sums - to prevent this most accounts enable you to limit loses by setting 'stop losses'. Also the combination of large spreads and many trades can whittle away any profits made.

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Listing contributed by Andy

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Best Personal Finance - Guide To Financial Spread Betting - Info, Pros, and Cons - 4 votes