There’s no doubt that financial spread betting has now become an integral part of any serious punter’s armoury. That said, it is still debatable whether it has yet to become truly ‘mainstream’. And this is a pity, because it’s fun, fast, and – and perhaps more importantly – can be extremely profitable if approached in the correct way.
The thing is when I was introduced to spread betting a number of years ago I immediately saw the incredible potential if approached correctly. For day trading there’s nothing that can beat financial spread betting.
As I said For day trading spread betting may be a better bet. Pardon the pun -;)
The fees are in the spread – so watch the spread. There is no CGT, stamp duty, explicit trading commissions.
Also, you can gain the same exposure at a much lower capital outlay. Bear in mind you may need the money to back it up!! And don’t forget, importantly it’s easy to sell short. You can place stops/limits on your losses (at a cost) to prevent you from losing your shirt.
Example: bank share is trading on a spread betting site at at 200p(bid) -203p (offer). Buy at £50 a penny at 203p, so each penny it goes up or down you are have/have not 203-current bid price. Similar to having bought £10,150 worth of the share. There’ll be a margin requirement depending on the market – say 10% for a FTSE100 share, so 1015 at the outset.
You predict the direction – you make a profit
You decide that a share price is going to move in a particular direction – you think it will go either up or down in price. You ‘buy’ if you think the price will go up and you ’sell’ if you think it will go down.
You stake a certain amount, for example EUR10 for every point that the share price moves. If the share price moves in the direction that you predict then you make a profit. If, on the other hand you are wrong about the price movement, you make a loss of EUR10 for every point it moves against you.
