An Introduction to Spread Betting
Spread betting is a very popular way of trading on the Stock Market as the potential rewards (and also potential losses) can be very high. As a newcomer to trading, spread betting could appear to be a very attractive way of entering the markets; but before you leap in feet first, it's important to understand what spread betting is and how it works or you might as well throw your money straight in the bin!
Spread betting is essentially a way of trading derivatives. Derivatives are financial securities whose prices are dependent upon (derived from) an underlying asset; usually a stock, bond or commodity. If that doesn't make sense yet, don't worry, I'll come back to that later.
Historically investors were pretty much restricted to owning shares. Since the invention of spread betting, a bookmaker effectively steps in and offers you the ability to bet on the share price of stocks.
If you live in the UK , spread betting also has a unique feature that's attractive to everyone; the profits are tax free. There's no tax on betting profits in the UK and spread betting takes advantage of this fact to offer a way of playing the markets without the drawback of sending a large slice of profits to the taxman.
Once you turn professional however, this tax break disappears and you have to start paying up like the rest of us, but as in reality most of us that do some spread betting still have to go to work every day too, you can worry about paying the taxman, when you've got so much money rolling in that, that's all you need to worry about!
Having a bookmaker take on the role of the stock exchange might not sound such a great idea, but spread betting companies are well-established and have been embraced by large and small traders alike as a user-friendly, cheap and flexible way to trade stocks.
Next : What is Spread Betting
Full Contents
• An Introduction to Spread Betting
• What is Spread Betting?
• How Spread Betting Works
• How Spread Betting Started
• Spread Betting Terminology
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