Financial

Short Course on Options – Getting to Square 1

Increase Awareness and Understanding on Spread Betting Spread betting enables you to create speculations whether an asset price will rise or fall. It is gambling of commodities and shares and house prices and indices. The amazing part of spread betting is being able to trade without you having to purchase the underlying asset. What you need to do is view the spread betting provider’s offered price, if the price will rise or fall. Spread betting firms offer a quote consisting of a selling or bid price and a slightly higher buying or offer price. Here is an example: say that the FTSE (Financial Times Stock Exchange) 100 stands at 4500, the spread betting firm more likely will offer you a bid price of 4498, and an offer price of 4502. Let’s say you are confident to buy GBP 10.00 for every point above 4502 that FTSE rises, and if does, then you get to earn GBP 10.00 for each point that the FTSE 100 rises. Say that the FTSE rises to 4522 by the time it closes, and you decide to also close your bet, you get a profit of GBP 200.00 (4522-4502= 20 x GBP 10.00). In contrast, if you think that FTSE will fall, then you sell at 4498. If you think it’s just quite a simple trade, you might check the risks and may lose out money fast too. So let’s say if you sell the FTSE 100 for GBP 10.00 for each point at 4498, and it actually rises to a spread of 4520/4524, you lose GBP 260.00. Since you can quickly lose money with the risks involved in spread betting, it is recommended to engage with a spread betting firm which can provide you some level of protection, allowing you to be able to eventually settle up using a “deposit margin”. A deposit margin is usually ten percent of the value of your bet, so if your losses exceed the margin, the spread betting firm will demand more money from you, known as the “margin call”, and failure to come up with the amount allows your spread betting firm to close out your position at the current price. It is advisable to stop losses because you can go broke when you just rely on margin calls for controlling your losses.
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One of the advantages of spread betting is the tax break, because in UK, there are no taxes applied on betting profits, either stamp duty or even on capital gains. It is also a simple, easy and cost-effective way of trading, without having to pay a fee when you buy share through a broker. A spread betting provider makes money from the amount obtained from the difference between the selling and buying prices.Learning The “Secrets” of Bets