Spread betting is the act of taking on a bet that does not have a fixed price. Usually, the company that is offering the spread betting services quotes two different prices; the selling price as well as the buying price. The variance between the two quoted values is known as the spread, and it is usually conducive when the price is lower than the selling price or it could even be higher than the buying price. An ideal spread for betting on is one that is narrower.
This type of betting differs a bit from the original style of betting. Instead, you decide if the share or product will rise or drop in value. After doing so, you put in some money by the per point movement. This deal is quite straightforward since you make more money if it is in your favour, however, if it goes against your expectation you lose in by the degree of movement. It is a smart gesture to pick out a much smaller spread since the market needs to move minimally to make a profit.
There are numerous commodities available to spread bet on:
- Commodities include fodder, agricultural products as well as metal among others.
- Currencies include the USD, the Euro, the Great Britain Pound and the foreign exchange
- Interest rates and bonds that have either long term or short term interest rates. There are also gilts as well as the government bonds to consider.
- Individual stocks involve putting in shares in companies anywhere in the world.
- Stock market indices are the most popular form of betting since an individual can bet in all the major global markets.
You need to know all the different categories of betting and master the one that works best for you.
- The daily bets are those whereby you bet on the value of a share or on the price of a particular index that reach their expiry at the end of the day. The daily bets have tighter spreads and are flexible since you could close and take out your profit, or loss at whatever time.
- The rolling dailies are those that are conducted overnight. The lending company buys the shares on your behalf. Therefore, you must pay a small interest on them daily. If you lose then, you have successfully lent them the money, however small it may be.
- The binary bets have both a positive and negative outcomes. They have 100% risk as the market cannot settle for anything that is more than 100 or less than 0.
- The ‘futures’ style bet is whereby you bet the price of something as it would be in the future. They expire on a quarterly basis. However, you do not have to keep the bet in the entire time. All the same, you have the chance to pull out when you want to.
The spread betting using platforms like CMC Markets can be very beneficial since the trades that are done have no additional charges nor do they have a commission. The final benefit of spread betting is the exemption from tax charges. For instance, the UK, as well as other markets, take spread betting as a form of betting and no capital gain is added to it.
Spread betting has a lot to offer, and it could help you to get to the top of your financial goals in no time. You need to be careful and gauge your predictions well. Do not expect too much though and do not get greedy. The rich have used this as an investment source, and it has worked out splendidly for them.
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