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Financial markets spreadbetting UK stock exchange world exchanges info about spread betting on financial markets, spreadbetting brokers, how to bet on market movements, currencies and econonmies, gambling on index best brokers for spreadbetting on index movements, ftse betting on world markets currency prices |
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How does spread betting work ?Spread betting is an easy and flexible way of backing your judgement on financial markets. The degree to which you are right (or wrong) in your judgement determines how much you make (or lose). In other words, the more you are correct, the more money you make (and vice versa).The way that this works is best illustrated by using a simple example. Basic concept Say you thought shares in BP were cheap and were likely to rise in the near future. One way of backing this view would be to invest money in BP by purchasing actual shares in the company. If your view proved to be correct, you could sell your shares at a higher price than you bought them, in order to make a profit. An alternative way of backing your judgement would be to make a spread bet, backing the price to rise, as shown in the example below. A spread betting firm quotes two-way prices (the spread on the market), which you can either 'buy' (backing the price to rise) or 'sell' (expecting the price to fall). |
 On average someone trades with CMC Markets every 2 seconds ! | CMC Markets was established in 1989 as a Foreign Exchange market maker. Since then we have become a global leader in online trading and provide access to equities, indices, forex, commodities, CFD's and financial spread betting | |
Demo Account ...Click here & open a spread betting account, receive a trading IQ pack* and we will give you a demo to trade for the first two weeks ! To receive this offer please call 0203 003 8090 or email trading[at]cmcmarkets.com and quote UK City Media. *Terms and conditions apply. Spread Betting is a leveraged product and carry a high degree of risk to your capital and it is possible to lose more than your initial investment. Only speculate with money you can afford to lose. This product may not be suitable for all investors, therefore ensure you fully understand the risks involved, and seek independent advice if necessary. CMC Spreadbet Plc are authorised and regulated by the Financial Services Authority. | ||
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Example: 'Buying' BP It is September. The spread betting price for December BP (a bet that expires at a certain date in December) might be 418 - 421. As you expect the price to rise, you would make an up-bet, by buying at 421, the higher end of the quote. Bet size As with normal share dealing, the larger your deal size the more you stand to make or lose for a given market movement. However, instead of dealing in numbers of shares or contracts, spread bets are denominated in pounds per point. With some firms you can bet on shares in as little as £1/point (penny). You might decide to 'buy' £5/point. This means that you make £5 for every point that our price rises above 421 (and you lose £5 for every point it falls below 421). A £5/point bet is the equivalent of buying 500 shares, because in each case a penny movement in the share price is worth £5 to you. Closing your bet
More notes. Spread Betting Examples You could take a £5000 long position in BT on the basis of just £500 cash sitting in your account using spread bets. A £20-a-point "up-bet" on BT shares in September from a starting level of 250 (pence) would give you the same exposure as buying £5000 worth of the shares - because £20 times 250 is £5000. Your maximum loss from the spread bet would be exactly the same as it would be from buying the shares - in the unlikely event of BT shares falling to zero, you would lose £5000 on both transactions. Summary - What is so good about spread betting ? First, you can use the technique to go long or short of a share. With stock markets so bearish over the last two years, it has been extremely difficult to make profits as a trader without the ability to go short. Second, spread betting is free of the taxes that dog the ordinary share trader. There is no stamp duty on up-bets or down-bets on a share, and any profits you make are not liable for capital gains tax. Third, it provides people with the ability to trade many different markets from just one account - British shares, American shares, European shares, stock market indices, government bonds, exchange rates, gold, oil, index options, and of course sport and politics. How do spread bets work ? - Another way to view spread bets. On a particular day, you may be quoted 5200-5210 for the FTSE100 index on 21 June. Your options are to make an up-bet from the top of the spread (5210), or a down-bet from the bottom (5200). You choose your stake size - £1-a-point, £2-a-point, all the way up to £100-a-point or more. Spread bets can be held all the way to expiry (on 21 June in the case of the FTSE bet above), or they can be closed at a profit, or a loss, any time before that. But Remember. These are high risk instruments. The companies that run Spread Betting though akin and affiliated to city brokerages are quite simply bookies. It is easily possible to loose more than you stake and Spread Betting is not for the uninitiated novice investor.
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