Spread Betting Companies
If you are an avid gambler or someone involved in the world of stocks and trading, you may want to turn some attention to the twenty-plus spread betting companies now actively operating in the United Kingdom.
Before you stop and say “I’m not interested in risking money in the markets” it is important to note that you aren’t actually doing any investing when you participate in spread betting of this kind. Financial markets spread betting does involve the value of a market or a specific company, but the individual laying the bet is not buying shares. What they are wagering on is the movement that they expect the specific stock to make.
Need an example? Let’s say you have been monitoring twenty to twenty-five stocks for a few weeks. You believe that one in particular is going to drop significantly over a single day or set period of time. You contact one of many spread betting companies and discuss your options for placing a wager. Should this stock decrease in cost or value, the gambler is likely to win their wager. This is far different from actual investing and trading because losses are not sustained by a stock or trade losing value, instead the savvy gambler makes money if prices drop.
This is one approach that many IT, financial, and insurance experts are using to enhance their portfolios in the current market conditions.
Because the number of agencies taking financial spread bet has increased, the spreads have come down. For instance, over the past decade the standard points spread for an index like the FTSE 100 was around ten points, but currently that has dropped to roughly a two-point spread.
It is significant to note that financial spread betting is “off” of the exchange and that the contract is drawn between the client and spread betting companies. This means many things, including:
1. Typical spreads are quoted per the agency. The sizes of the spreads will vary for many reasons, but usually due to:
a. A wager placed outside standard market hours
b. A wager with guaranteed “stop” losses in place – which means that the agent automatically closes the bet should the spread move significantly against the gambler’s specified range
c. The time in which the wager is laid – for example spreads may be less beneficial to those placing a wager during the first hour of the trading day
2. Spreads will be quoted in a variety of ways, including “tic”, point size or “pip”. Basically this adds up to the stake which is usually per point movement. there is also option for spread betting free trades, remember to check it out.
3. Regulation is done through the FSA or the Financial Services Authority and not the Gambling Authority.
4. Profits are free from Capital Gains Tax, but anyone who relies on this system for their primary source of income may be required to pay Income Tax on winnings.
5. Minimum stakes or wagers are a standard requirement with almost all spread betting companies.