Stockbrokers are not the only way you can play the stock market. Spread betting allows for you to wager on the movements of indexes such as the FTSE100 or the price of individual shares.
You are given a price at a future date and can bet that the share price or index will rise or fall. You can also wager on commodities and exchange rates.
Spread betting on financial markets began in the 1970s, when investors wanted to speculate about the price of gold without needing to spend a lot of money.
Spread betting is like any other investment. It is important to understand the risks involved. Bookmakers recommend that clients only speculate with the money they have available. Volatility in market conditions can lead to substantial gains or losses.
Spread betting is right for you? What are the most important things to remember?
1. What is a spread betting and how does it work.
Contact the bookmaker to request a quote for a specific share or index. You might ask for the FTSE 100 June spread. The spread will be, for example, 6,870-6,880. www playsbo com You can sell points if you believe the market will be lower. You can also buy points if you believe it will rise. Then, you can bet on anything above Pounds 2 per point. You would win Pounds 1,100 if the market closed at 7,100. If you bought at Pounds 5 per point, you would win Pounds 2,100. You would lose Pounds 350 if it closed at 6,800
2. What are the advantages of bets over shares?
There is no tax on winnings, and there are no stamp duties or fees for stockbrokers.
Spread betting can also be used to place bets on shares yet to go public, such as those of internet companies.
Lastminute.com was initially offered 350p to 360p by IG Index, but the spread was quickly increased when investors purchased enthusiastically. The spread was initially quoted at 620p – 630p, but it sank back to 570p-580p last Wednesday.
Another advantage is the fact that you can make more money on share price fluctuations.
If a share is worth Pounds 10, and you place a bet for each penny increase, then you would wager Pounds 50 to get a 5p rise in share price.
3. Other than shares, what else can I place a bet on?
You can bet on everything from politics to sport. There are many innovative wagers that you can make, including the number and location of corners in a football match, or whether William Hague will continue to lead the Conservative party.
4. What is the maximum amount I can bet on any given time?
The minimum bet is usually Pounds 2, but you can place a maximum of thousands of pounds per point.
Bookmakers may grant you a line or ask for money to deposit.
5. Is there any limit to how much I can lose?
For those who wish to reduce their liability, bookmakers offer stop-loss options. You can specify the level at which your bet will be closed.
If the spread for a share is 150p-160p you can choose a stop loss price of 120p. You would not lose more than 300 Pounds if you lost 10 Pounds per point.
The bet will automatically end if the stop loss price is reached. This applies even if the index or share recovers. Every bet is monitored to ensure that potential losses do not exceed the credit limit, or the deposit amount. Any dramatic price movements will be notified by the bookmaker. The bookmaker will alert you to any dramatic price changes and allow you to close your position.
6. What should I do if my bet is losing
You can cut your losses or take your profits even though you have placed your bets on a future price. Contact the bookmaker to get the most current quote. Then calculate your winnings and losses accordingly.
As in the Footsie example above, if the market rose and you back it to fall, you may decide to cancel your bet. In the meantime, the bookmaker updated its spread to 6,910- 6,920.
Closing the bet is as simple as buying 6,920 Pounds 5 points. This means that there is a difference of 6,920-6.870 points. Therefore, your loss is Pounds 250. If the market rises dramatically after the close of your bet, and you want to keep your profits before any further falls, you can close the bet at the current rate and walk away with all your winnings.
7. Is there any advice from the bookmaker?
8. Spread betting is suitable for all?
These bets are useful for both cautious investors and speculators. A person with money in the stock exchange could wager that the market will decline, effectively protecting their portfolio at the current level.
9. How do bookmakers make money?
Bookmakers make their profits by putting their profit into the spread. Hedging is a way to protect yourself from losing bets. They believe it doesn’t matter if people win or lose. Therefore, they would prefer that people win and continue betting.
10. Spread betting: How can I get started?
Open an account by contacting a spread-betting broker. Bets can be placed over the phone or, more often, online. Every bet placed will be notified to you in writing.