Financial betting acts in parallel to the actual city. Prices are primarily set by the underlying market and quoted by the spread betting companies. So why use a spread betting firm?
Spreads tend to be wider than the underlying market but there is no commission or stamp duty to pay and any winnings are free from capital gains tax*.
On a practical note, the financial markets are primarily there to serve institutions. This leads to a trading structure that is ideally suited to large trades, but is cumbersome for small trades conducted by private clients. So contracts that are traded on LIFFE maybe to large, or commission charges to high compared to the amount traded to be staked.
Financial betting has been embraced by people who work in the City already, as they are already confident of how the markets work. Their motives may be to pit their wits against the consensus or more practical. Such as taking a contra position to their firm in a profitable year. This achieves a hedge for their year end bonus. The clientele is changing though, as the general population grows more sophisticated.
Financial Spread Betting Background
Financial Spreads - tax free* trading on over 2,500 spread betting markets. With a Financial Spreads Account you can trade commission free, 24 hours a day on stock market indices, forex, shares commodities and...read review » Financial Spreads.
Everyone has a stake in the economy, either in a private company to economic growth, or in a public organization to the whims of the latest government initiative. So it is important that the general population get more actively involved in the financial markets.
Financial spread betting can be a misleading term. Betting is normally associated with taking on risk. With financial spread betting though you can reduce risks that are inherent to everyday life. Such as:
- Protect your pension or portfolio from falling markets by selling stock indices, or even shorting the equity itself, something that is not easy to do in the underlying cash market
- If you're worried about your mortgage rate going up you can sell “Short Sterling” futures and use any profits to help pay for those increased mortgage payments, ie bet on Interest Rates going up
- Fix your exchange rate of your holiday money months in advance of going
- You can even buy Crude Oil futures to protect against large swings in the cost of a tank of petrol
With financial spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital. Please familiarise yourself with the risks that are involved and before trading, ensure that financial spread betting matches your investment objectives. Seek independent advice where necessary.
Financial Spread Betting Background - edited by D. Jones, 26 May 2008.
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With spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital so please familiarise yourself with the risks that are involved and, before trading, ensure that spread betting matches your investment objectives. Seek independent advice where necessary.
* Based on current UK tax law. Tax law may change and can differ depending on your personal circumstances.