Options | Futures | CFD's | Spread Betting

SPREAD BETTING

Spread betting allows you the punter to back your trading judgement without having to buy the underlying instrument or product you want to trade. Simply put, like any other bet, a spread bet is a bet on an unknown outcome made at odds set by someone else - in this case, a spread betting company. The spread represents a prediction of a future outcome. And because spread bets have an expiry date, it's a prediction of a future outcome within a set time frame (although you can close out your position at any time before expiry). What you need to decide is whether to buy or sell the spread betting company's prediction of the future outcome.

FOR

1. You the punter can expose yourself to the profit and loss potential of a particular asset without having to actually pay the full cost of buying it.
2. No tax liability or commission to pay.
3. Most spread betting companies offer contracts based on FTSE100 / 250 shares along with leading shares traded on US and Euro indices.
4. Spread betting contracts are wide ranging and allow the punter to exercise his or her judgement in other areas such as options, movement of interest rates and currency exchange rates.

AGAINST

1. Spreads quoted on financial instruments don't relate to the current market price, but to a projected price at a future date. So spread betting involves a much wider spread than trading in the markets themselves.
2. You don't own the instrument you're trading, so you can't hang in there for the long run waiting for their value to rise or enjoy any of the benefits that ownership might bring eg. a nice fat dividend payment!
3. Spread bet contracts have limited lifetime. If you wanted to 'roll over' a bet into the next contract month you would have to close out the current one (which could involve realising any losses) and open a new contract in the next.