Britain has long been a nation of gamblers, with betting shops offering coverage of horses, dogs, football, boxing and whatever other sport the companies can think of. The days of smoke filled local betting offices have long gone and technology has taken over. Betting is enjoying a boom due to easier access over the Internet.
The average punter has come a long way, seeking bigger thrills and rewards than the old traditional fixed odds betting. This demand has partly been met by 'Spread Betting', which enables the customer to bet on political events, economic, sporting and daily events.
It's the economic 'Spread Betting' that has caught the attention of investors. With bets being accepted on the direction that a range of individual shares and indexes are going to go. Investors have quickly realised that they cannot only make money on the stock market going up. They can also bet on the market going down.
Investors are used to assessing risk and are more than aware that when they buy stocks and shares they're effectively gambling on that company's stock improving. The difference is they can also use their experience and knowledge to make returns on companies they think will perform poorly. As the return they make is winnings, they are not liable to any form of income or capital gains tax.
Investors should, however, be aware that 'Spread Betting' is not for the faint hearted and could in effect leave the investor nursing heavy losses. You should look closely at the Bookmaker's Terms and Conditions before taking a position with them.
An investor can bet on the direction of the FTSE 100. If the bookmaker gives a quote of 4400-4450 for a contract (which may last a month), you will either bet higher, or lower than this range.
Should the FTSE hit 4550 for instance, and you've staked £5 per point, your overall profit will be £500. Of course, if the market heads south 4300, you end up losing £500.
If you had chosen to sell the FTSE, instead of buy - you would end up winning £500 in a falling index, or lose £500 in a rising index.
The system allows you to
place a position, no matter whether you think the market will fall, or rise.
This is a direct contrast to Fixed Odds Betting where the Bookmaker determines
the odds that are offered.
You are allowed to close your position part way through a contract, which is
useful if you're happy with your return, or if you think the mood of the market
is about to change.
Before you open any bet, you need to ensure you have enough funds or credit to cover your position. An example of one 'Spread Betting' index would be a requirement of 300 times your stake. So, if you're going to bet £5 a point, then you will need either £1500 cash, or £1500 credit. This requirement tends to very between Bookmakers.
If the thought of unlimited losses is worrying, then you can adopt a 'stop/loss' facility. This will kick in if your contract falls to a certain level. Once the 'stop/loss' is activated then the bet closes. This is irrespective of the market recovering before the end of the contract.
If used properly 'Spread Betting' can become a useful way to invest money without tax on returns. Like any investment you should do your research thoroughly before jumping in.
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