Financial Spread Betting Guide

Financial spread betting is a flexible way to trade the financial markets without holding the investments directly in your hands it is a margined (leveraged) investment vehicle allowing investors to trade and speculate on the financial markets. Private investors open thousands of Financial Spread Betting accounts a month to take the advantage of the current tax policy (Financial Spread Betting is CGT and income tax free). Spread Betting has experienced a big grow in the last few years and the competition between companies has become vigorous to attract new customers by offering tighter spreads and better customer service.

Placing a spread bet gives you an instant access to the price of the financial markets, allows you to take long or short positions without the stockbroker's interference and offers you to trade all the different financial markets (equities, individual shares, commodities, currencies, and bonds) from a single account. Unlike traditional share dealing and CFDs where you have to pay a commission for every transaction, in Financial Spread Betting the commission is built into the spread (difference between 'bid' and 'offer').

Financial Spread Betting is also free from stamp duty and UK residents do not pay CGT (Capital Gains Tax) along with the other advantages making the spread betting the fastest growing leveraged product in the UK.

When you spread bet, you do not buy shares or commodities but instead you make a bet as to which way you think the market or share price will move. You can bet per penny or point movement - the amount you wish to bet is known as the 'stake', and can be as little as £1 per point. It is important to understand that £1 bet on shares represents 100 shares (how many shares do you need to buy to make £1 if the share price goes up 1 penny? 100 shares).

Financial Spread Betting, just like Contract For Difference, is a margined product, thus only small deposits are required to open a new position (with some Spread Betting companies £30 is enough to open £1 FTSE100 position, refer to Spread Betting comparison). Once you have chosen the market on which you wish to bet, you can bet the stake of your choice (each market has its own min and max allowable stake), which will represent your profit or loss per point movement in that market. For this reason you must be aware that your losses (just like profit) can increase dramatically if the markets move substantially in the opposite direction to your bet.

Spread Betting Example:

Winning Trade	Losing Trade
1. The FTSE 250 market is quoted as follows: 9600-9602	1. The FTSE 250 market is quoted as follows: 9600-9602
2. You can either buy at 9602 (the offer price) or sell at 9600 (the bid price)	2. You can either buy at 9602 (the offer price) or sell at 9600 (the bid price)
3. You think the price will go higher than 9602 and you bet £2 per point	3. You think the price will go lower than 9602 let's say £1 per point
4. Your expectation is right and you decide to sell at 9642	4. Your expectation is wrong and you decide to sell at 9622
5. You will then pocket £80 (40 * £2 per point)	5. You will then loose 9622-9602= -20 * £1 per point = loss of £20

Experienced investors use financial spread betting as an additional trading tool as the spreads (commissions) are low. Alternatively, many investors use spread betting to hedge their existing share portfolio. For example, if you have some shares, which are decreasing in value in the short-term, you could 'sell' the value of the share using a sell bet.

You do not need to be an experienced investor to spread bet, but you DO need to research the products that you wish to trade and be aware of the risks associated with spread betting. Many individuals, experienced and new, use technical analysis to guide their investment decision. All spread betting companies provide some sort of charts and technical tools, use the comparison tool and read reviews to find out who provides the tools you need.