In the world of finance, spread betting has become an alternate method of gaining income. This method is free from the taxman’s reign. There is also a chance for an investor to make profits whether the market goes up or down. Wide access to various markets such as the traditional shares, the foreign exchange market and commodities makes financial spread betting ideal for any investor.
So how does it work? Well just as the name suggests, there are two aspects involved, the spread and the bet. The spread is the difference between the buying or bid price and the selling or ask price. Different spread betting companies offer differing spreads. Therefore, smaller spreads mean that the price has to move less for a profit to be realized. The way of making profit is by selling if you think the market will fall and buying at a higher price if your evaluations conclude that the market will rise. Popular terminologies to express the same are going short and going long respectively
The bet part is simply guessing or evaluating whether the market will gain strength or lose it. You never actually own the commodity or share in question. You wager a certain amount of money and if your estimations were exact, you make more money; if not, you lose money. Therefore, the dynamics of spread betting will work to the advantage of a wise investor.