Financial Spread Betting – Two Choices
Conventional share trading limits the investor to two choices: you can either buy a particular share, or you can sit on your hands. With financial spread betting, you have three choices – you can go long of a share, you can go short, or you can sit on your hands.
In addition, any profits made on spread betting are not liable for UK capital gains tax, and investors can usually place a bet without meeting more than 20 per cent of their exposure in cash up-front.
Say you were bullish on the stock market and wanted to benefit from a rise in the FTSE100 over the next few months. You could telephone your bookmaker and make an “up-bet” on the Footsie in June. If you risked £5-a-point, and the spread quoted when you called was 6300-6312, you would stand to make £5 in profit for every point by which the Footsie exceeded 6312 at the expiry of the bet in June.