Spread Betting Explained

by Darwin on October 6, 2014

So, you’re probably asking what spread betting is.  It’s essentially making a directional assessment of whether an asset will increase or decrease in value over time.  It’s that simple!  The asset of interest could be anything from a major market index like the FTSE 100 to various types of commodities like oil, gas, hard commodities and more.  Outside of actual assets, there are some markets for world events like political outcomes and even celebrity news.  The universe is ever-expanding.  But most of the action still resides in the financial markets.

How to Do Spread Betting

It’s not very hard to get started.  By taking a stock market index like the FTSE 100 as an example, you’d want to place a bet on whether you think the index will rise or fall over a set period of time.  If for example, the FTSE 1000 is at 6500 when you enter a position, the spread betting company may offer you a selling price of 6490 and a selling price of 6510.  Based on the amount you pay per point, you can gain or lose money based on where the market closes at the end of the given period.

Risks and Benefits

It wouldn’t be a thorough writeup without incorporating some risks and benefits analysis as well.  A common risk is that you could lose your entire investment if the bet doesn’t go your way.  On the plus side, you can offset this risk by metering how likely or unlikely the outcome is that you select, and secondarily, you can magnify your gains.  Finally, there are stop loss options which allows you to limit the amount of your loss if you can’t stomach losing your entire initial amount.  This is yet another means to mitigate risks.

Spread Betting has become increasingly popular throughout the UK, although it has not caught on yet in the United States.  Who knows, perhaps time will tell until it spreads further given its popularity with Brits.

Here’s a popular spread betting firm if you want to learn more and get started.


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