What is Spread Betting?

At its most basic, Spread Betting is where you bet on the outcome of something that will change or happen. Against the occurrence, a position will be stated (the spread), and the spread better will place a bet that an outcome will move outside what has been stated. Crucially, the spread better is able to bet that the outcome will be higher or lower than the Spread.

As an example, if the stock price on XYZ Enterprises is 100p, and the spread offered against this stock is 97-103p, a spread better may believe that in fact the price will fall over a give period of time. He or she may decide to 'sell' the stock at a 'stake' of £10 per point of movement against the stock (also known as a 'down bet' or 'going short'). If the stock falls to 94p then the better would win £10 x 3 points (97-94p) or £30.00. Conversely, they could 'buy' the stock (also known as an 'up bet' or 'going long').

Spread Betting is categorized into 3 main areas:

Financial Spread Betting Sports Spread Betting Fancy Spread Betting

In all cases. the bet is on the movement against the stated spread. In sports betting, and example might be being offered a spread of 2-3 goals scored in the coming Liverpool v Manchester United game, and believing that it will be a goal-less draw (2 points different to the spread). Fancy spread betting could essentially be anything at all, duration of a particular standing ovation at a political conference speech, or the price change for an average house in the UK.

Is Spread Betting for me?

There is much discussion relating to the viability of spread betting as an investment medium. Whilst it is true that there are higher risks involved in spread betting, especially when compared to traditional financial investment methods, the rewards are far greater when you get the investment right.

One of the most attractive factors behind spread betting is that any gains are non taxable and do not attract stamp duty. All dividends are built into the bid-offer spread negating the requirement to pay tax on dividend payments. Also, because spread betting takes place between the client and the spread betting company, no shares are actually owned, and therefore no stamp-duty is owed.

Of course, there are risks involved with any type of betting and you should be aware of those risks before you enter into any financial transaction. The advice is old but absolutely accurate - do not bet more than you can afford to lose!

I run a site aimed at educating beginners to what spread betting is and how to get involved. The site can be located at http://www.spreadabet.co.uk Article Source: http://EzineArticles.com/?expert=Matt_Lawless