Spread betting is a process of speculating whether asset price will rise or fall. It is gambling of commodities and shares and house prices and indices. Spread betting allows you to trade without having to purchase the underlying asset. All you need to do is to watch on the prices offered by a spread betting provider if it will rise or fall.
As to the process of how spread betting works, an offer is provided by a spread betting firm which is consists of a selling or bid price and a slightly higher buying or offer price. Here is an example: say that the FTSE (Financial Times Stock Exchange) 100 stands at 4500, the spread betting firm more likely will offer you a bid price of 4498, and an offer price of 4502. If you believe that the index will rise, you can “buy” for GBP 10.00/point at 4502, and for each point the FTSE 100 rises, you earn GBP 10.00. So if by the day’s closure the FTSE rises to 4522, you may close your bet and earn a profit of GBP 200.00 (4522-4502= 20 x GBP 10.00). On the other hand, if you think that FTSE will fall, you sell at 4498. If there are high rewards in spread betting, there are also high risks, and you can lose money fast. Say for example, if you sell the FTSE 100 for GBP 10.00 per point at 4498, and it rises to a spread of 4520/4524, then you lose GBP 260.00.
Because of the considerable risks of spread betting, it is advisable to engage in a spread betting firm which can provide you some level of protection, allowing you to be able to eventually settle up using a “deposit margin”. Deposit margin is usually around ten percent of your bet’s value, and the spread betting firm can demand more money if you exceed the deposit margin, thereafter you will receive a “margin call”, and failure to come up with the amount allows your spread betting firm to close out your position at the current price. It is best to stop losses than go broke by depending on margin calls to control your losses.
3 Lessons Learned: Services
One of the benefits of spread betting is the tax break, since there are no taxes applied on betting profits in UK, either stamp duty or even on capital gains. It is easy and simple to follow, and a cost-effective way to trade, because it doesn’t involve paying a fee every time you buy a share through a broker. A spread betting firm earns profit from the difference between the bid or selling and offer or buying prices.A 10-Point Plan for Bets (Without Being Overwhelmed)