Financial spread betting is practiced in UK and provides opportunities to investors or traders to consider any kind of financial instrument. That can be index, commodities, currencies or specific shares. The traders can speculate on these without owning any of them. The term spread has a particular meaning in the trading world. The difference between the offer price and the bid price is called the ‘spread’. In financial spread betting the same rules for buying and selling shares are followed as is normally done.
The bid price is the one at which the share is sold and the offer price is the one at which the share is bought. Generally the offer price is more than the bid price while quoting. While placing a bet you will be enquired about the amount you want to bet on per penny or per point basis. For beginners it is important to start off with small amount because the share market is dynamic and it changes rapidly. You will either make gains or lose out on your money when the market slumps and soars. Therefore, start with small amount and build on that.
Another useful tip for a beginner is that you can set up a stop loss price wherein you will not have to keep a keen eye on the market and you bet will be automatically closed at the decided price. If you are not doing this, the bet will stand until you decide to close it. There are quite a few advantages related to spread betting. Quarterly administration fees, management fees and dealing commissions are not involved in spread betting.
The best part is that spread betting is tax free. You will not have to pay tax for any kind of capital gain in spread betting. Under the new regime, no duty or tax is required while placing the bet either. While you select a financial spread betting company, you must find out about their spread skewing, spread tightness, dispute resolution, hitting stops, internet trading time, price expirations, time to fill and slippage. Hence, millions have been made while spread betting and lost as well. Calculate properly before entering into this industry.