Spread Betting on Shares
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Spread Betting on UK Companies
Spread Betting on US Companies
Spread betting on shares - How does it work?
It was only during the late 90's that spread betting on shares really took off.
Financial spread betting on shares is based on the movement of shares in the stock markets.
Investors track the market movements and conclude if the price of a particular share will rise or fall.
The basic difference in investing in shares and spread betting on shares is that with spread trading on shares:
- you do not own the shares – you are only speculating on whether the value will increase or decrease
- the bet has an end date
- it is easier to speculate on the downwards movement of shares when spread trading
- profits are tax free*
Financial Spreads >>
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Financial Spreads review.
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Understanding Market Movement of Shares
If you want to spread bet on shares you need to have a good understanding of how the market moves.
Example: You like the look of a company and think that their share price will increase. You decide to buy the share for the price listed on the spread betting company's website eg 3802. You also choose a particular stake size eg, £3 pounds per point. Then if at the end of the month the share value rises to 3950 you will have made a profit. Your profit would be calculated as follows:
Outcome 1 - share price increase:
Profit = (Opening price – closing price) x £3 pounds per point
= (3950 - 3802) x £3 per point
= 148 points x £3 per point
Your profit = £444
Outcome 2 - share price decreases:
Of course had the share price fallen, you would have lost. Let's say the price closed at 3750, then your loss would be calculated as:
Profit = (Opening price – closing price) x £3 pounds per point
= (3802 - 3750) x £3 per point
= -52 points x £3 per point
Your loss = £156
Factors to consider when spread betting on shares
Before you start spread betting on shares you need to consider a many factors:
- Market fluctuations and the share price movement
- Directors buying and selling shares
- Takeovers (and takeover rumour)
- Financial performance of the company
- Your investment capacity / your ability to afford losses
Spread betting companies in the UK
Online financial spread betting companies offer many options for share trading in the UK. Most of them offer financial spread betting accounts where you can spread trade on shares. Cantor Index, CMC Spreads, Capital Spreads, City Index and FinancialSpreads.com are some of the spread betting companies in the UK you could open an account with.
Financial Spreads >>
"With FinancialSpreads.com you get all the normal
advantages of Spread Betting plus..." >> read
Financial Spreads review.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Spread betting on Shares' by KK, updated 07-Dec-08
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