Spread Bets in the Credit Crunch
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In such volatile times there will always be opportunities to make a profit and plenty of opportunities to lose more.
One industry that has become even more popular during this period is spread betting. Investors are enjoying the ability to buy and sell indices like the FTSE 100, thousands of other stocks and shares, forex markets, crude oil, gold etc. etc.
Naturally many investors like the fact that there are no commissions or brokers fees and that spread betting profits are tax free*.
That is all well and good. Although at this point I should mention that spread betting is not a one way street, it carries a high level of risk to your funds. You can lose more than you initially invest. It does not suit all investors so make sure spread betting matches your investment objectives and if necessary seek independent advice.
In short, you should only speculate with funds that you can afford to lose. And, like the adverts say, ‘ensure you understand the risks and seek independent financial advice if and when necessary’.
The above pros and cons are not the only considerations in today’s volatile market.
For the investors across the world there are further important considerations:
- Are my funds safe? Or do I lose everything I have on deposit if my spread betting company runs into financial problems?
- What happens if I trade on a particularly volatile day? How can I reduce my downside?
Financial Spreads is one place that fits the bill.
What about my funds on Deposit?
As a private customer you are subject to the protection afforded by the Financial Services Compensation Scheme. Your funds are kept in a segregated client money bank account, as per rules laid down by the FSA, which is ring-fenced and cannot be used by Financial Spreads for our own purposes.
What happens if I trade on a particularly volatile day? How can I reduce my downside?
The spread betting companies have moved on from the days of unlimited losses.
Financial Spreads, for example, attaches a Stop Loss to every single opening trade you make. So if your trade goes wrong your bet will be closed out when the market hits the Stop Loss. It should be noted that Stop Losses are not guaranteed, eg if the market gaps then your trade will be closed at the next level the market trades at.
In such volatile times there will always be opportunities to make a profit. Just make sure you are not taking any risks on who you trade with.
Note that opening a Financial Spreads Account is subject to suitability and possible credit checks. See site for details.
Financial Spreads is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority. Registered address: 4th Floor, 12 Appold Street, London EC2A 2AW.
"Spread Bets in the Credit Crunch" last update by R Thomas, 01-Jun-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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