Financial Spread Betting – Why To Trade

Lucille Wood

4 years ago

Spread betting essentially means wagering on what will be the outcome any event. Available in various types, spread betting involves pay-offs that are based on how accurate a wager is instead of simply relying on a win or lose situation, like pari-mutuel betting or fixed-odds betting. Here, a spread is defined as a number of outcomes and the bet as predicting whether or not the outcome will be above the spread.

Becoming a major market in the United Kingdom, nearly a million gamblers are tapping into spread betting even with the high risks involved that could give just as high losses or gains that exceed the actual wager. With a lot of people taking part in it, it is regulated in the United Kingdom by the Financial Services Authority (FSA).

Financial spread betting comprises the largest official market in the United Kingdom concerning financial instruments. It is a means of speculating on financial markets in about the same way that derivatives are traded. Unlike in fixed-odds bets, the amount to be lost or won is unlimited as there are no single stakes that can limit losses. Still, limits can still be negotiated with a bookmaker. Should the stock market fall, this can also be used as a way to hedge against predicted losses in share portfolios.

Why consider spread betting in the first place

This actual product has been around since the 1980s. Some of the reasons why it’s become a very popular choice for investors include:

• It’s tax-free – profits don’t require taxes to be paid since they are not recognized as profits based on tax laws. Rather, profits are defined as winning bets so Capital Gains Taxes do not apply.

• No commissions or fees required – the actual companies do not charge broker’s fees or commissions so all costs provided in spreads are all you have to worry about.

• Easy to understand – compared to future tradings and options, this derivative uses terms and calculations that are very easy to understand, letting you jump right into it as soon as possible.

• Regulated industry – strict rules apply in spread betting because it is regulated by financial authorities. This gives you an extra layer of security and protection when it comes to your investments.

• 24-hour access – a lot of companies are open all week, 24 hours a day so trading is open even when the markets are closed, letting you trade at a time convenient for you.