Spread betting works on the ideas that rather than betting on a binary outcome of an event, i.e. a horse wins or it doesn’t, that you bet on the ‘close-ness’ to a range of outcomes. One of the most popular areas for spread betting is the financial markets. In these circumstances the aim is to be as near to the actual outcome as possible.
What is Spread Betting – unlike other forms of betting, spread betting is a legally enforceable wager and they are regulated by the FSA an independent body which also monitors financial services like loans and mortgages.
The biggest difference between spread betting and traditional betting is that you don’t wager on a binary outcome with just two outcomes but a range known as ‘The Spread’
Advantages to Spread Betting
When dealing with the stock market one of the huge benefits of spread betting is you don’t need to own the assets to profit from them. For example you might believe that the value of Google shares will rise but are unwilling to pay their current value as you don’t think they offer good value for money, with spread betting you can still benefit from their improving cost.
Can profit from a fall – typically it’s harder to make money from shares when the market is falling however when spread betting it is entirely possible to bet on a specific decrease in the market; enabling you to benefit from a down turn in the market
Profits can be Tax free – although if you are regularly GCLUB benefiting from winnings from spread betting the government can treat it as an income but initially the profit is subject to capital gains tax. It’s a lot more risky an investment than even the most adventurous venture capital scheme so it wouldn’t be recommended as a tax evasion technique.
What is the Spread? This is the options laid out by the bookmaker to bet upon. This include the odds which are expressed as a zero coupon bond.
What is the bet? There are typically two types of bet used in spread betting. The first is known as an Up bet which is sometimes also known as a buy bet. This is selected from the top of the book makers spread. The other option is down bets or sell bets these are selected from the bottom of the spread.
Gains and losses – these are calculated by working out the ‘points’ distance between the close-out and opening prices which are then multiplied by the stake per point.
This is only scraping the surface of spread betting. As you can probably tell it’s quite a complex area but can be hugely rewarding for anyone who specialises in it as a career