The term financial spread betting is particularly broad in scope. Within this context there are wide range of instruments, markets and timeframes that you can bet on. This article will explore each of those areas in turn to give you some idea of the types of financial spread betting that you can do.
In fact, spreadbets can today be placed on a vast variety of financial instruments. The chances are that if it’s a market you’ve heard of then you can usually be able to place a spreadbet on it. Stocks and indices tend to be the most popular as people feel most comfortable trading familiar names such as Barclays (BARC) or Vodafone (VOD). Having said that, they can also trade foreign exchange and commodities.
Financial Spread Betting Instruments
Most good financial spread betting companies will offer you a broad range of instruments to trade on. The most common of which are spread betting on indices and forex spread betting, but many companies also offer individual shares, commodities, interest rates and even house prices.
Indices are made up of a weighted basket of individual stocks and they are a way of measuring a particular section of the market. This section could be a number of the largest companies in a country or it could represent a particular sector. In spread betting terms, common indices to bet on are the FTSE 100, the Nikkei 225 and the S&P 500.
Forex (foreign exchange) is traded in currency pairs. This is a popular choice among spread betters as the spread in forex is usually exceptionally tight and the trends are long running.
Betting on stocks allows you to bet on the movement in price of an individual stock. This enables you to leverage your capital significantly as you don’t need to physically own the stock in order to profit from its movement. As with most financial spread betting you can gain from a rise or fall in the price of the instrument.
Commodities represent bets on the futures markets for items such as gold, oil and grains. It is normally expensive to trade commodity futures as the contract sizes are relatively large. With spread betting you are free to size your bet as you see fit.
With interest rate bets you are gambling on the movement of either short term interest rate contracts or longer term government bonds.
Finally, some spread betting companies allow you to profit from rises and falls in property prices without having to actually own any property. This is an incredibly cost effective way to reap some the benefits of property ownership without needing a mortgage and/or large amounts of capital.
Financial Spread Betting Markets
The good spread betting firms will give you access to a number of significant markets around the world. From your one UK trading account you can profit from the movement in price of instruments that are traded all around the world.
For example, you could trade the GBP/USD forex pair, the American Dow Jones index, individual shares listed on the Australian Stock Exchange and UK house prices all from the same account.
The most popular spread betting markets tend to be the FTSE 100, Dow Jones 30, sterling-dollar, euro-dollar, gold and oil. Betting on individual UK shares is also an area that is attracting increasing interest although trading individuals shares is only possible when the underlying exchange is open.
Financial Spread Betting Timeframes
Financial spread betting allows you to take positions in these instruments on a timeframe that suits your trade expectations. Whether you want to profit from a short term intraday movement in forex, a run on next month’s gold futures or hold an interest rate position indefinitely, there are different vehicles that will allow you to do so.
Conclusion
The beauty of financial spread betting is that from just one trading account you can access all of these instruments in all of these markets over all of these timeframes. The icing on the cake is that your bets are currently free from capital gains tax and stamp duty.