So what is spread betting?
With traditional stocks there are two different prices you may purchase or sell that stock at. They are called the bid and offer price.
The lowest price of the two, which is what you would get for your stock when you place an at market sell is called the bid price. This is the price that investors are willing to buy the stock at.
The higher price of the two, which is the price that you would pay for your stock if you were placing an at market bid is called the offer price.
Put simply the difference between the bid and offer prices is called the spread.
With spread betting if the punter or better believes the price of the stock or index is going to go up they will buy(place your bet) at the offer price-the highest price.
Obviously if you were placing a sell bet it would be the exact reverse from the above example.
A spread better will have to decide how much of a bet they would like to wager per penny or per point that the stock or index goes up or down.
Here is an example of a spread better who believes a stock price will go up.
Ok you hear a rumor form a trustworthy friend who is always in the know, that Coca Cola is about to acquire another very successful drink company and you believe if this is the case that Coca Cola is now way undervalued.....
So you decide to place a bet and the spread price quoted is 867-868. You place a $10 per point bet. Your bet will start at the higher price which is 868.
Three weeks later Coca Cola does indeed buy a famous drink company and their spread price now is quoted at 1020 - 1021. Very nice!
Your payout is based on the lowest price of the new spread( 1020 ) So the difference from where you opened the bet is 152 points. To find out how much you have made simply multiply the amount of points made by your bet amount. 152* $10= $1520. Not a bad profit in three weeks.
Check with your tax specialist but one big advantage of spread betting and the reason it is so popular is that it is normally treated as a bet in most countries and is therefore tax free.
Essentially this is how spread betting works.
Where can I find a company that offers spread betting?
Apart from providing CFD Trading the companies below also offer Spread Betting and they are our picks for value,service and reliability...
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