First of all, what is spread betting? You will need to know as much as you can before going into this type of betting since there is an extremely high risk factor and a lot of dangers involved in financial spread betting. The odd are usually only 1 out of 5 gamblers that end up winning.
Now spread betting is any of numerous types of wager on the outcome of an event. It is not exactly a win or lose kind of outcome but rather the pay off is based on the accuracy of the wager. A spread itself is a range of payoffs and the bet is if the payoff will be above or below the spread. It is a type of speculation wherein it involves taking a wager on the price movement of a security.
You can use spread bets to speculate on price movements whether the market is rising or falling. If you go long (buy), your profits will increase in line along with the price. If you go short (sell), your profits will increase in line with any fall. Collectively, if you go on long on the price and the underlying stock price falls, you will acquire losses.
A spread is a range of results and the bet is whether it will be above or below the spread. So for example, let’s assume that a spread-betting company will quote a bid of £300 and an offer of £303 for XYZ stock and you think that the price for XYZ will be lower than £300. If you believe the price of the stock will go below £300, you could “bet” £2 for every pound that XYZ falls below £303. Hence, if the stock price after a week came to £290 you would receive £26 but if the price goes up to £315 you will end up losing £24.
Spread betting has been a growing trend in the UK market in the recent years with a number of bettors heading off towards a million. It carries a high level of risk, with probable losses or gains much farther than the original money wagered.
If this is so volatile, then why people are still betting? It is because it is one of the most exciting and fastest growing ways of speculating movements and it is very flexible and a cost efficient alternative to trading the usual ordinary shares.
If you’re willing to take the risk and you’re up for doing something different than the usual shares in the stock market, then you could try spread betting. But always keep in mind that even if you do increase your profits here, you should weigh in if this benefits you or if the losses is more than the wins then you should pull out.
No one wants to keep on losing their hard-earned money, right?