Investing can sometimes take on the feeling of betting and those who want some excitement in addition to making money have options that can satisfy both desires.
One way they can do this is to engage in spread betting which is a type of derivative investing that allows investors to place bets on where a stock, commodity or other specified asset’s price will go from its current price.
Spread bettors do not purchase the actual asset, and as such their being able to benefit from the movement of the asset is a much less expensive proposition than purchasing the asset.
Spread betting is all about speculation and trying to predict they rise or fall of an asset price. The spread bettor is given two prices; a purchase or bid price and a sell or ask price. The amount between the bid and ask price is called the spread. An investor can bet on the bid if they believe the price of the asset will increase and they can pick the ask price if they believe the asset price will fall. This simple bet is made within a period of time that is pre-determined.
In spread betting there is a broker who positions the betting but unlike typical stock or commodities purchasing the broker does not charge a fee for a buy and sell of the asset. Since no asset is purchased the broker will make his commissions within the spread.
Spread betting is very simple yet can also involve complicated strategies that take into account patterns of assets movements. Investors use these strategies to decide whether to go long, short or both on the same asset. To learn more about the elements of spread betting click here to have spread betting explained.
Spread betting also has a range of benefits for investors. Some of the top ones include:
Low Cost Entry
Because you are not purchasing the asset you are betting on, entry into spread betting is only a portion of what it would cost to do stock trading. You however can leverage a similar amount of stock and receive the same gains.
Access to Global Markets
Spread betting is typically done online by companies that provide spread betting platforms and tools. He best of these companies provide access to thousands of global markets where spread betting can be done throughout the day.
Bettors only have to put down a margin deposit to open their positions for a spread bet. This allows for increased returns when they have a winning bet.
Trade Multiple Assets
With spread betting you can choose stocks, indices, bonds, currencies, and commodities including gold, silver and oil, as your underlying asset.
Risk Management Tools
The top spread betting platforms provide tools that help better to manage risk, lock in profits and limit potential losses.
In the UK, Germany, France, and many other countries spread betting is federally regulated providing protections to spread bettors and their money.
Tax Free in the UK
If you spread bet from the UK you are free from capital gains tax or stamp duty.
Spread betting is very popular throughout Europe and not legal in the US. In order to get involved with spread betting you need to understand how it work and be clear about the risks involved.