Financial Spread Betting Services
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The above spread betting services / markets may also be available with other companies. Also see Comparison Table Notes.
About Financial Spread Betting
Financial Spread Betting offers some interesting features and is worth considering as part of your investment strategy.
From property investment to share trading, every form of speculative investment can result in a loss. With spread betting, these losses can be greater than your initial stake size.
So why spread trade? Put simply, financial spread betting offers tax efficiency* as well as quick and simple access to access to World markets.
Financial Spread Betting Advantages:
- Spread betting is tax free*. You are not actually buying and selling any assets or stock or shares. You are simply speculating on the future price of a financial market.
- The London Stock Exchange may close at 4.30 local time but with companies like FinancialSpreads you can spread bet on the FTSE 100 throughout the night. You can also trade a good number of other markets outside normal market hours.
- Depending upon the market conditions, you may wish to close a trade early to either take a profit or limit a loss.
- The large variety of markets, such as shares, indices, fx, commodities and interest rates, provides potential exposure to a lot of new markets.
- Being able to 'short' a market provides interesting opportunities. You do not have to speculate on markets to go up. If your research suggests that the Euro/Dollar exchange rate will go down you can speculate on it to go down. If your research indicates that the FTSE 100 or Dow will go up you can spread bet on it to go up.
- Generally, most trades are filled automatically, you don't have to worry about finding another party wanting the opposing trade. You are simply speculating on the future price of a particular market; you are not taking ownership of an asset or stock.
Important Note: Spread bets carry a high level of risk to your capital, you should only speculate with funds you can afford to lose. Like the adverts say, before trading, please ensure that spread betting matches your investment requirements. Familiarise yourself with the risks involved. Seek independent advice where necessary.
Financial Spread Betting – How To Trade
The most popular trades are the Stock Market Indices, in particular the FTSE 100, Dax 30 and the Dow Jones (referred to as Wall St in spread betting). For more on trading indices see Indices Spread Betting.
Other popular markets include the FTSE 100 shares, eg financial spread betting on the Barclays share price.
Barclays (December) Trading Example
At the moment, the price of the Barclays (December) market is 345.2p - 346.6p with spread betting firms such as Tradefair.
As with the majority of leading shares listed on the stock exchanges like the LSE and the NYSE, an investor can spread bet on the future price of Barclays shares either increasing or decreasing in value. With this Barclays (December) market, which closes on 15-Dec-09, investors can bet on:
a) Barclays shares to close higher than 346.6p on the closing date, or
b) Barclays shares to close lower than 345.2p on the closing date.
Note that with the Barclays market you trade in £X per penny, where a penny is 1p of Barclays share movement. As a brief example, if your stake was £8 per penny and the Barclays share price moved 8p then that would result in a difference to your profits/losses of £64.
Barclays Shares Spread Trading Example
For example, let’s assume you see the real time price on a financial spread betting website that gives the current spread of 345.2p - 346.6p. So, having done suitable analysis, you may think that the Barclays share price will increase and settle above 346.6p. Therefore:
- You believe the Barclays shares should go up
- As a result, you decide you want to ‘buy’ the market at 346.6p and you risk £4 per penny
- The share price rises. You let your bet run to the expiry date of 15-Dec-09
- The market then closes at a price of 367.0p
- You bought the spread bet at 346.6p
- Profit = (Closing Level - Opening Level) x stake
- Profit = (367.0p - 346.6p) x £4 per penny
- Profit = 20.4p x £4 per penny
- Profit = £81.60 profit
Nevertheless, if the trade did not work as predicted, and had the Barclays shares decreased in price, closing lower at 328.0p, then you would have lost money on this trade.
- Buy price = 346.6p
- Loss = (Closing Level - Opening Level) x stake
- Loss = (328.0p - 346.6p) x £4 per penny
- Loss = -18.6p x £4 per penny
- Loss = -£74.40 loss
(Prices accurate as of 09-Nov-09)
"Financial Spread Betting" last update by R Thomas, 06-Sep-2010
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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