Spread betting refers to making speculations or assumptions whether there is a rise of fall on the price of an asset. Spread betting allows you to gamble everything from house prices and indices to commodities to shares. Spread betting allows you to trade without having to purchase the underlying asset. What you need to do is view the spread betting provider’s offered price, if the price will rise or fall.
As to the process of how spread betting works, an offer is provided by a spread betting firm which is consists of a selling or bid price and a slightly higher buying or offer price. Let’s sat for example, the FTSE (Financial Times Stock Exchange) 100 stands at 4500, the spread betting firm will likely offer you a selling or bid price of 4498, and a buying or offer price of 4502. Let’s say you are confident to buy GBP 10.00 for every point above 4502 that FTSE rises, and if does, then you get to earn GBP 10.00 for each point that the FTSE 100 rises. Now, if the FTSE rises to 4522 at the end of the day, you may decide to also close your bet, and get your profit of GBP 200.00 (4522-4502= 20 x GBP 10.00). On the other hand, if you think that FTSE will fall, you sell at 4498. If you think it’s just quite a simple trade, you might check the risks and may lose out money fast too. Say for example, if you sell the FTSE 100 for GBP 10.00 per point at 4498, and it rises to a spread of 4520/4524, then you lose GBP 260.00. to learn more about spread betting, visit https://en.wikipedia.org/wiki/Spread_betting.
Since you quickly lose lots of money if anything goes wrong with your trade, you may engage in a spread betting firm that can provide you some protection that allow you to be able to eventually settle up using a “deposit margin”. A deposit margin is usually ten percent of the value of your bet, so if your losses exceed the margin, the spread betting firm will demand more money from you, known as the “margin call”, and failure to come up with the amount allows your spread betting uk firm to close out your position at the current price. It is best to stop losses than go broke by depending on margin calls to control your losses.
One of the advantages of the best spread betting platform is the tax break, because in UK, there are no taxes applied on betting profits, either stamp duty or even on capital gains. It is easy and simple to follow, and a cost-effective way to trade, because it doesn’t involve paying a fee every time you buy a share through a broker. A spread betting firm makes money from the difference between the selling and buying prices.