Financial betting acts in parallel to the actual city. Prices are primarily set by the underlying market and quoted by the spread betting companies. So why use a spread betting firm?
Spreads tend to be wider than the underlying market but there is no commission or stamp duty to pay and any winnings are free from capital gains tax*.
On a practical note, the financial markets are primarily there to serve institutions. This leads to a trading structure that is ideally suited to large trades, but is cumbersome for small trades conducted by private clients. So contracts that are traded on LIFFE maybe to large, or commission charges to high compared to the amount traded to be staked.
Financial betting has been embraced by people who work in the City already, as they are already confident of how the markets work. Their motives may be to pit their wits against the consensus or more practical. Such as taking a contra position to their firm in a profitable year. This achieves a hedge for their year end bonus. The clientele is changing though, as the general population grows more sophisticated.
Everyone has a stake in the economy, either in a private company to economic growth, or in a public organization to the whims of the latest government initiative. So it is important that the general population get more actively involved in the financial markets.
Financial spread betting can be a misleading term. Betting is normally associated with taking on risk. With financial spread betting though you can reduce risks that are inherent to everyday life. Such as:
Protect your pension or portfolio from falling markets by selling stock indices, or even shorting the equity itself, something that is not easy to do in the underlying cash market
If you're worried about your mortgage rate going up you can sell “Short Sterling” futures and use any profits to help pay for those increased mortgage payments, ie bet on Interest Rates going up
Fix your exchange rate of your holiday money months in advance of going
You can even buy Crude Oil futures to protect against large swings in the cost of a tank of petrol
'Financial Spread Betting Background', review by D. Jones, last update: 26-May-08
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Trade the tightest FTSE spreads available² & find a range of benefits at:
FinancialSpreads.com
£1 per point: Start trading £1 per point/tick & an initial deposit of £30
Multiple markets: Forex , Commodities, Indices & Equities
Risk Warning - Spread betting carries a high level of risk to your capital & you may lose more than your initial investment. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seek financial advice where necessary & make sure spread betting meets your investment objectives.
(1) The FTSE Rolling Daily Spread is 1 tick during market hours & 4 ticks out of hours. 1 Tick is defined as a full FTSE point. See our Product Information for more details. (2) The above information is correct at time of writing. (3) Tax Law can change.
FinancialSpreads.com is a trading name of London Capital Group Ltd which is authorised & regulated by the Financial Services Authority (FSA). Registered address: is 4th Floor, 12 Appold Street, London EC2A 2AW. All information correct at time of publication.
Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it may not be suitable for all investors. Ensure you only
speculate with money that you can afford to lose and that you fully
understand the risks involved and seek independent financial advice where necessary.
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* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
