Financial Spread Betting Online
In recent years spread betting on the financial wagering markets has becoming increasingly popular with a wide range of people. When most people think of betting they think of horse races and other sports, but these days it is possible to bet on virtually anything in one way or another. Betting on the financial markets is just one example of how betting has evolved. Speculating on the financial markets is nothing new to investors and traders and people have been investing in stocks and shares for as long as the stock markets have existed. Spread betting on stocks, shares and other financial instruments is just another way of speculating on the financial markets.
Best Financial Spread Betting Sites
What is Financial Spread Betting?
Experienced sports bettors, particularly those that bet on American sports, will be familiar with the term betting on the spread. However, spread betting in this context has a different meaning. Spread betting is most prevalent in the United Kingdom, and other countries in Europe, and can be done on most sports as well as the financial markets.
Financial spread betting is generally done with a spread betting company. Spread betting companies are essentially a type of online bookmaker, and indeed some traditional bookmakers do offer spread betting services. Like any form of betting, spread betting involves taking risks with the potential to make returns. However it is very different, and a little more complicated, than the more traditional fixed odds bets or bets on the moneyline.
Traditional fixed odds betting is largely about betting on something that you think will happen and is basically a win or lose situation. For a sports related example of fixed odds betting, you may choose to bet on a particular team winning a match; if the team does with the match then your wager is a winner and if the team loses then you lose your stake. Spread betting is different though and, although still based on predicting whether you think a certain something will happen, the potential pay-off or cost of the wager is based on how much something happens by. The concept might sound a little confusing, but it should start to make sense if you look at the example below.
How does Market Spread Betting Work?
For an example, let’s look at one of the more popular types of spread bet – spread betting on the price movement of shares of companies. Let’s say you were looking at spread betting on shares in a particular company that was listed on the UK stock exchange, and the share price was 182p. A spread betting company would quote two prices; the lower one being the bid price and the higher one being the offer price or the ask price. In this example, the two prices might be 181 and 183. The difference between the two prices is called the spread.
You would choose whether you think the share price is going to go up or whether it is going to down and place your bet accordingly. If you decide to bet on the share price going up, this is called buying the spread and your bet will start at the offer price (the higher of the two prices). If you choose to bet on the share price going down, this is known as selling the spread and your bet will start at the bid price (the lower of the two prices).
At the time of placing your bet, you will need to decide how much you wish to wager per point. A point in this instance is the equivalent of one penny; so if the share price moves up from 182p to 188p, then it has moved six points. For this example, let’s assume you have decided to bet at £10 per point and look at the various scenarios.
Scenario One. You place a buy bet (this means you are betting on the share price going up) and the share price does indeed rise. The spread offered by the spread betting company is now 195 – 197. At this point you decide to settle your bet, which is known as closing your position. You bought the spread at the offer price of 183 so you close out on the bid price of 195. This is a difference of 12 points and you have wagered £10 per point so you would win £120. Your bet is always settled based on the spread offered by the spread betting company, not the actual share price and it stays open until you choose to close your position.
Scenario Two. You place a buy bet as before, but this time the share price actually goes down. The spread offered by the spread betting company moves to 175 – 177 and you decide to close your position before the share price falls even further. You had bought the spread at the offer price of 183 and closed out on the bid price of 175 a difference of 8 points. In this instance, your bet has cost you £80.
Scenario Three. This time you place a sell bet, believing the share price is going to go down. The share price does fall, and the spread moves to 175-177 at which point you close your position. Having sold the spread at the bid price of 181 and closed out on the offer price of 177 you make a profit of £40 – you stake of £10 multiplied by the 4 points difference.
Scenario Four. You place a sell bet, but the share price actually rises. The spread offered by the spread betting company increase the spread to 195-197 and you choose to close your position in case the share price continues to increase. Having sold the spread at 181 you close on the offer price 197 for a loss of £160.
The amount that you can win at spread betting is technically unlimited as there is no fixed return against a stake. However, there is also greater risk involved as your potential loss is not limited to a single stake. With most spread betting companies, though, you can set a stop loss when placing a bet. This means that your bet will automatically closed if the spread moves a certain amount against your favour.
Spread betting sites offer a number of different markets that you can bet on. In terms of financial betting, there are four main options. Share spread betting involves betting on the movement of the prices of shares in companies that are listed on the stock markets, as shown in the example above. Index spread betting is very similar, but instead on betting on the prices of individual shares you bet on movements in stock market indices. Foreign exchange spread betting is particularly popular and is based around the fluctuations in the value of global currencies. Commodity spread betting is also quite common and involves wagering on the changes in prices of particular resources – such as gold or crude oil.
For further information on these different forms of financial spread betting, please refer to the following page – Forms of Financial Spread Betting. You may also be interested in learning about binary betting, which is a slightly different form of financial betting. You can read more at the following page – Binary Betting.