Financial Spread Betting

WHAT IS SPREAD BETTING? 
Spread betting is a way of investing in the movement of a particular market – like forex, shares or indices – without actually owning the asset. Spread betting allows you to take a position on whether you think a market will rise or fall, without having to buy the underlying asset. Importantly, spread betting is a leveraged product. This means you only have to put down a small deposit for a much larger market exposure. Betting using leverage means there are significant benefits and risks: your investment capital can go further, but you can also lose more than your initial deposit. Spread betting is flexible as it's possible to take short positions and deal on over 10,000 markets. However, it is important to understand the risks involved and have suitable risk management strategies in place. Is spread betting for me? Spread betting is suitable for: Active traders looking for tax-free profits* Shares traders looking to diversify their portfolios People who are interested in the markets and what affects them Those looking to add flexibility to their investment capital, through leverage. Spread betting enables you to speculate on the movement of a particular asset – like a currency pair, company stock or even an entire index – without actually owning the asset. With spread betting, you predict an outcome, and the degree to which you are right or wrong determines the size of your profit (or loss). Spread betting differs from alternatives such as fixed-odds betting, where you have a simple win/lose outcome and a pre-defined payout or loss. When financial spread betting, the outcome you're speculating on is the direction in which the price of a financial instrument will move. If it moves the way you predict, your profit will grow the further it goes. However, if the market moves against you, your loss will also increase as the price movement becomes greater.

Betting on the price increasing is referred to as going long, while betting that it will decrease is called going short (or ‘shorting’). How spread betting works When you spread bet, you’re betting on whether the price of an underlying asset will rise or fall. The spread There's a quote of two-way price on each market. This comprises the offer price and the bid price. The difference between these prices is known as the spread. If you think a market is set to rise you ‘buy’ at the offer (higher) price, and if you think the market is set to fall you ‘sell’ at the bid (lower) price. When you want to close a bet, you take the opposite action to when you opened it: buying if you sold, and selling if you bought. For that reason, the market price of your asset will have to move beyond the spread before any profit is made. The bet size The bet size is the amount you bet per unit of movement of the underlying market. You can choose your bet size, as long as it meets the minimum we accept for that market. Your profit or loss is the difference between the opening price and the closing price of the market, multiplied by the value of your bet.

Spread betting is a type of speculation that involves taking a bet on the price movement of a security. A spread betting company quotes two prices, the bid and offer price (also called the spread), and investors bet whether the price of the underlying stock will be lower than the bid or higher than the offer. The investor does not own the underlying stock in spread betting, they simply speculate on the price movement of the stock. 

BREAKING DOWN 'Spread Betting'

For example, assume that a spread-betting company quotes a bid of $200 and an offer of $203 for ABC stock and you believe that the price for ABC will be lower than $200. Since you believe that the price of the stock would be go below $200, you could "bet" $2 for every dollar that ABC falls below $200. Therefore, if the stock price after a week came to $190 you would receive $20, but if the price was $215 you would end up losing $30.