 The concept
Financial spread betting is based on a simple concept. If you
think that an underlying instrument will rise in value, then you
‘buy’ it (known as going ‘long’). Conversely, if you think that it
will fall in value, then you ‘sell’ it (go ‘short’). However,
unlike full value trading where you actually take possession of the
underlying instrument, with financial spread betting you are simply
taking a position that allows you to speculate on movements in its
price.
How does it work?
Rather than buying the investment directly, you bet an amount on
each point or 'penny' that its price moves. As the price moves,
your profit or loss is simply the price movement multiplied by your
stake. You can see how this works in our Trading Examples section.
As with traditional share dealing, you will be quoted two prices
on an instrument that you choose to trade. The lower of the two
prices is called the ‘bid’, and is the price that you will receive
if you sell. The higher of the two prices is the ‘offer’ and is the
price you will pay if you buy. The difference between these two
prices is known as the ‘spread’, and represents the cost of
trading.
For example, if the UK 100 Rolling bet has a quote of 6134
Bid / 6136 Offer, you could either Buy at 6136 if you think that
the UK 100 index will rise, or Sell at 6134 points if you
thought the index would fall.
Margin
Spread betting is a margined product, which means you only need
to deposit a small percentage of the full value of your trade in
order to open a position. This deposit is known as ‘margin’ and
varies between instruments, but can be as low as five per cent of
the total value of your position. More detail can be found
on our Spreads and Margins page, and
in the Finspreads Market
Information Sheets. Note that this leverage can result in
losses quickly exceeding an initial outlay, so please ensure that
you fully understand the risks involved.
Access to global markets
Spread betting gives you the ability to trade on the movement of
thousands of instruments across the world's financial markets from
a single account. You can speculate on price movements of
equities, indices, currencies, commodities and many other financial
products. Full details of our markets can be found in our Spread Betting Markets section, and in the
Finspreads Market
Information Sheets.
Spread betting carries a high level of risk to your capital with
the possibility of losing more than your initial investment and may
not be suitable for all investors. Ensure you fully understand the
risks involved and seek independent advice if necessary.
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