Spread betting is a form of investing in which a trader speculates on whether the price of a financial asset will go up or go down. The trading brokerage that offers spread betting will quote the trader two prices, the bid and the offer price. The trader then places a bet on whether the price of the financial asset will be higher than the offer, or lower than the bid. Spread betting differs from traditional stock trading for the fact that the investor does not own the underlying stock, but rather speculates on the price movements of the stock. Spread betting can take place in over 15,000 markets and has the potential to be very profitable as the trader uses leverage by putting down a certain amount, rather than buying the underlying stock or financial asset.show more
Spread betting offers investors various advantages over other means of investing and trading stocks. See some of the key advantages listed below.
Investors participate in spread betting using leverage. Meaning traders can do more with less capital. They do not have to fulfil the full position, but rather put a certain percentage down. Traders have potential to make greater profits, but at the same time, the same can be said for losses as well.
Since the investor does not actually own or buy the financial asset they’re betting on, they can profit in a falling market by going short (selling) the product.
In most countries, traders are not required to pay capital gains tax, commissions, or stamp duty on spread betting profits.
Traders can participate in spread betting 24 hrs a day, 7 days a week and there are over 15,000 markets to trade in.
Spread betting can be a lucrative investment opportunity, but it’s not for everyone. See below some attributes that make spread betting a suitable investment method.