Financial Spread Betting (page 8 of 9)

Financial Markets

There are many different areas that you can partake in financial spread betting, for example:

a) Individual shares
You can place spread bets on the price movement of all the UK's largest quoted companies and also many of the larger foreign companies.

Spreads offered will take into account the cost to the bookmaker of buying and holding actual shares in the companies to enable them to hedge their own risks.

The spread offered will always be bigger than the bid and offer prices of a share, but you avoid stamp duty, capital gains tax and commission by spread betting.

Spread bets on particular shares run for fixed periods before expiring, e.g. 6 months. You can take on a spread bet or close a spread bet at any time, but if you want a bet to run from one period into another you will usually incur charges. This makes spread betting inefficient for long term investing, but it is a great way to speculate on an company's share price.

Another advantage of spread betting over traditional share buying is that it is easy to 'short' a stock - i.e. make a profit from it going down. You can do this with normal share buying but it can require special arrangements and would usually only be for a short period, whereas spread bet down-bets can be left to run for months.

Finally, you can also bet on the 'Grey market'. This, for instance, allows you to bet on a share before it has even floated. A few weeks before a large company is floated bookmakers will allow spread betting to commence.

b) Stock Market Indices
Bookmakers will allow you to place spread bets on many of the London and world's stock market indices, e.g. the FTSE100.

This allows you to gamble on market trends, rather than run the risk of a specific company.

c) Currencies
Spread betting on exchange rates is popular with speculators as it means they don't incur commissions or high dealing spreads. As with other spread bets, you will usually be charged for rolling a spread bet on from one period to another. E.g. if you place a spread bet on the Dollar-Euro exchange rate in November you may need to pay a small fee to roll it on into December.

Other areas you can operate financial spread bets in include interest rates, commodities (e.g. gold or oil) and options (which can be complicated and very risky).

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