Share Betting
In the 1980s a few financial spread betting companies emerged that allowed you to place bets on the movements of shares. Since then the sector has expanded and a significant amount of share trades in the city of London are made by spread betting firms.
Share betting vs share buying
Why do people bet on shares? Why not simply buy and sell shares in the traditional way? There are a number of answers to that. Here is a list:
It's tax free
Yes its hard to believe but any gains you make are not subject to capital gains tax.
No commission or broker's fees
When you buy and sell shares in the normal way you can expect to pay a broker a fee or commission. This however does not apply to financial spread bets. There is a small cost for each bet, which is hidden in the price differences - depending on whether you are opening or closing a bet. But for many shares this can be less than 1%.
Make money in a falling market
With share betting it is just as easy to bet on a share price falling as rising. This means that when share prices are going through a downturn it can be a good opportunity for making money.
Trade on world markets
We hear a lot of information about how US companies like Google or Microsoft are doing and there may be times when it looks like their shares will rise or fall. But if you wanted to buy and sell on the American exchanges it would be a bit complicated finding a US broker and opening a dollar account. With financial spread betting however, you can bet on shares all round the world from one account just as easy as you can FTSE 100 shares. You can also trade out of market hours which can be useful - especially when there is a time difference.
Large profits from small movements
Because you never actually own the shares but instead put a bet on them, you don't need to fork out huge amounts of cash that you would when buying and selling shares. This means that with relatively small amounts of cash you can profit from shares that you wouldn't normally be able to buy.
This last point is a crucial one and what helps makes share betting so attractive. It does however also make it more risky, so if you don't take sensible precautions you stand to lose a lot of money on just one bet.
Getting started share betting:
- Try it out first with fake money by opening a financial spread betting demo account. It's free and a good way of making your mistakes without actually losing money.
- Choose the best spread betting company that's right for you and open your account.
- Make sure you understand how spread betting works. We recommend you take a look at our beginner's guide to financial spread betting and also check out the spread betting tutorial.
- Deposit money in your account. Most companies require that you have about 30% of the value of all your open bets sitting in your account in order to cover yourself against possible losses.
- Before you actually make a bet make sure you are familiar with the safe spread betting guidelines.