Spread betting explained
You can make money if you can predict values.
In this short spread betting guide we look at why it’s becoming increasingly popular among private investors.
Financial spread betting gives you the opportunity to bet on what you think will happen to a particular financial instrument in the future. You would ‘go short’ (sell) if you think a share is going to decrease in value or ‘go long’ (buy) if you think it likely to rise in value.
When you spread bet you never actually own the financial asset, you are essentially making a prediction as to its future value. The degree to which you are correct in your judgement and how much you stake per point will dictate how much you will win or lose.
The spread is the difference between the price at which you ‘buy’ and the price at which you ‘sell’ in a market.
For instance, a spread betting company might offer the FTSE 100 Daily at 6065.8/6066.8. If you want to ‘buy’ you do so at 6065.8 and to ‘sell’ you do so at 6066.8.
One of the major benefits of spread betting is the increased leverage it affords the individual investor. You only have to pay a small percentage of the total value of shares you want to take a position on, this is known as the deposit.
What that means is that instead of paying the full amount for the desired shares, an investor can get the equivalent exposure by spread betting and paying a smaller initial deposit, typically 10%.
A good place to start your spread betting career is with the oldest spread betting company in the world, IG Index. Always remember financial spread betting carries significant risks and that’s why IG Index provides a wide range of resources to help you become a more informed and better trader. Visit them at www.igindex.co.uk.