Financial Betting
There are a growing number of companies, mainly based in the UK, offering various forms of financial betting. Financial betting is a way of betting on financial markets. It's mainly stocks and shares that people bet on but there are actually a whole range of financial instruments, such as currencies, stock markets indices and commodities such as oil and gold prices. Just about all the financial betting companies will let you set up an account and bet on all of these instruments both in the UK and overseas markets. This is a great way of trading on foreign markets such as the American NASDAQ without having to worry about setting up a special account with an US stock broker.
Financial betting basics
There are basically two forms of financial betting: binary betting and financial spread betting.
Binary betting
A binary bet is where you bet on something happening or not happening. This is just like regular sports betting where you would bet on a particular tennis player winning Wimbledon for instance. There are only two options here: either he or she wins the title or doesn't. There is no in between. Similarly, examples of financial binary betting are:
- Crude oil price rising above $120 by the end of the month
- FTSE 100 stock market falling today
- There will be more stocks rising than falling on Wall Street today
- The Pound will hit $1.42 sometime within the next 5 minutes
Spread betting
The more popular form of financial betting is financial spread betting. In spread betting the more a share rises the more you win. The spread is the name given to the amount a share or any other financial instrument moves in a set time period. So for example you could place a bet on BP shares with a stake of £3 per point. If BP shares rise 10 points you then win £30 (£3 X 10 points). The more the share rises the more you win. If however the shares dropped 10 points then you lose £30. A point incidentally is usually a penny so a change from a share price of £3.50 to £3.55 is a spread of 5 points. We've talked about betting on shares going up but one of the pluses of spread betting is that you can just as easily bet on things going down. This means that unlike regular share dealing you can profit from a falling market.
Who does financial betting?
These days it's easy for anyone to open a spread betting account. As well as individuals who like a bit of a flutter, it is proving attractive to people who are serious professional gamblers and who find that financial markets are more predictable than sporting events. There is also a growing number of professional stock market traders who previously made a living buying and selling shares through a stock broker. They are moving towards trading using financial spread betting. The main reason for this is that because it is classed as gambling, under UK law all profits are tax free. This is a huge incentive to professional traders.
If you are interested in finding out more about financial betting you can try our Financial Betting for Beginners guide to take you through the basics, leading you up to our Financial Spread Betting tutorial.