In financial spread betting, bettors bet on spread of a chosen financial instrument. Financial spread betting offers many advantages over traditional share trading. But it is essential to understand the risks involved. Financial Spread betting is an effective investment tool if one understands the nature of selected financial instrument. Financial spread betting also offers tax benefits.
You need to open a financial spread betting account in order to trade as a financial spread bettor. You need to fill in an application and spread betting companies carry out credit and/or suitability checks before opening an account. Most financial spread betting companies often offer two types of account i.e. a deposit account where you deposit enough money to cover trading requirement or a credit account wherein you have a credit level for trading. Once that is done, you can start your financial spread trading and most companies let you trade over the Internet. The product range on offer varies again between companies. While some focus on shares, others focus on the most liquid and heavily traded forex markets.
To help investors familiarize themselves with the basics of trading, some of the leading financial spread betting companies offer a virtual trading account. Here you can trade with virtual money in an account that contains nearly all of the features and functions of a real financial spread trading platform. Most sites also have informative pages that give you details about a company’s financial position and the past performance of its shares.
Let us take an example of Mr. X. He approaches a financial spread betting company to open financial spread betting account. Once he has opened an account, Mr. X tries to figure as to how and where to spread bet. He finally decides to invest in ABC Company. The spread betting company quotes a spread for a daily trade between 131p and 133p. He sells £25 per point to go short at the bid price of 131 using the daily spread bet quote. He follows the stock movement through the day. To avoid too much loss Mr. X has used a stop loss feature whereby he instructs the company to automatically close the bet at 126p. Company ABC closes stock at 135p. Hence Mr. X has made a profit. Profit = (135 – 133) x £25 per point stake = 2 points x £25 per point = £50 profit
However, had the market move against Mr. X and finished at 130p then he would have lost. Loss = (133 - 131) x £25 per point stake = 3 points x £25 per point = £75 loss.
Some of the leaders in the financial spread betting markets include CMC, Capital Spreads, Cantor Index spread betting, City Index spread betting, Finspreads spread betting, IG index spread betting and Trad Index among others.
When you open financial spread betting account with these leading companies you can take advantage of delving into numerous types of financial spread betting markets and also make the most of the free information available to clients on the sites. |
Added: Sun Jun 17, 2007 11:45 pm GMT 