Beginner's Guide to Spread Betting

 

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Introduction
This tutorial refers to financial spread betting. This means that we are talking about stock, index, future, forex, treasury, commodity and market sector spread bets. If you are looking for information about sporting spread bets then unfortunately this tutorial will be of no use to you.

Depending on your geographical location and the legal jurisdiction you fall under, spread betting may or may not be available to you. For example, gambling laws in the US may prohibit spread betting as it is classified in the same bracket as visiting an online casino.

 

 

Spread betting has evolved in, and is dominated by, specialist UK firms. The concept was first introduced over 30 years ago when a bookmaker devised a way of betting on futures indices. The evolution has continued to the present day with greater competition for business creating an increase in financial products on offer and tighter spreads (the difference between the bid and the ask/ offer price). So why has spread betting taken off in the UK while it has remained relatively unheard of in other parts of the World? It is because UK tax laws class gambling (spread betting is classified as gambling, hence the name ‘bet’) as being free from capital gains tax. And as you never take physical ownership of any contacts or shares there is no stamp duty payable. This financial niche has been the major contributing factor to the growth in the spread betting market.

What is Financial Spread Betting?
In the simplest of terms, placing a spread bet means to put a ‘bet’ on a financial instrument moving higher or lower in value. Obviously the idea is to bet in the direction you think that the price will move. This method of speculation differs from the open market, as you will never physically own any security.
Spread betting is becoming increasingly popular with investors and traders alike for a number of reasons. In this tutorial we will do our best to show you how spread betting works, the similarities and differences with open market trading and the associated advantages and disadvantages.

Contents:
1. Introduction

Next:
2. How it Works, Similarities and Differences
3. Examples
4. Gambling vs Trading
5. Summary
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