Why Spread Bet?

[Sharky]

OK I thought Id kick off this forum with a discussion about why you might consider spread betting over other forms of financial trading. Here are a few reasons why you might consider opening a spread betting a/c. Be aware this is just food for thought and none of it is intended as financial advice! On with the show..

No Fees

You can forget broker fees, stamp duty and capital gains tax. The only cost in spread betting is the spread, and thats all you pay!

Selling Short

Clearly spread betting gives you the ability to sell short which is invaluable when the market is falling or to maximise your returns from the cycle of peaks and troughs in a sideways market.

Hedging

Hedging enables you to limit risk in a cost effective way. As an example, you might have a large exposure to the uk stock market, but your'e worried that theres weakness in the market and its due for a fall. If you decided to sell your shares and buy back later, then you incur all the costs involved. Instead you could place a down bet against the ftse 100 for example. And if the market were to fall then any loss in your portfolio would be offset by profit from your spread bet.

Leverage

Even with a relatively small amount of risk capital you can gain a meaningful exposure to the market. This can of course work both ways you can make and lose a great deal of money if your not careful, but there are ways to limit this risk such as controlled risk bets or stop loss bets.

Diversification

By allowing you to bet on an index rather than just a share, you can gain instant balanced explosure to the market.

Range of Markets

Gives you more choice by enabling you to bet across the financial markets as well interest rates, currencies, commodities etc.

OK well thats just a few ideas from someone who's just started out spread betting, I'd really welcome any comments from more seasoned traders to find out whether spread betting really is a viable alternative to other forms of financial trading. Also worth visiting is our new spread betting chat room #trade2win-sb. You can access this room from any of our other rooms just by typing /join #trade2win-sb

Sharky.

 

[titus-uk]

Interested...

Have been thinking a lot about this recently... after all, in trying to go long in the traditional sense, means I am always fighting the trend at the mo - a recipe for disaster. Will be interested to hear what others who do spreadbet have to say on the manner....

Mark

 

[Mooringsman]

Sharky,

Can you give an example of a spread bet and where you set your stop loss and how the actual share price compared at the time?

Does it matter if you disclose to the spread betting company whether you are buying or selling when asking for a quote and does the size of the bet affect the quote?

Sam

 

[momoney]

Never give any hint of what direction you wish to go in, you're asking to get ripped off.
Remember the incentive process for the person on the phone, is to win sales credit (commision)

 

[bonsai]

a few more thought

1- Spread betting is free of Income Tax
2- One stop shopping.- I can trade all the instruments I want at the one counter
3- 24/5 Open hours. I dont have to be exposed overnight. I can open/close at a time of my choosing not LSE's

 

[momoney]

We should remind everyone that the income tax is replaced by a gambling tax which is actually a higher bracket for most people!!

An investment bank has a bid-offer of 1 cent on an interest rate future
Through a 'SB' service the bid offer can be up to 8 cents on that same product
Competition is slowly driving this down, but do remember you are being taxed heavily
within that bid offer spread

Access to products is fantastic though I agree

 

[bonsai]

Income tax is not replaced by 'gambling tax'

nor any other tax

 

[donaldduke]

The only reason why i SB is because of the tax free status.
If it wasnt because of this i wouldnt bother.

The main disadvantage to SB is ofcourse the wider spread. If you research active trading systems
you find that some dont work nearly like aswell when using SB because of the higher transaction
costs incurred.

However all long term trading systems (eg long term trend following ones) should work just
aswell via SB as they would with Futures, and because SB is tax free you get the 66% extra in
profits!

 

[momoney]

Guys I'm confused by your replies....
Spread betting is seen by the authorities as gambling,
are you guys saying there is no tax here??

 

[luckystrike23]

momoney visit financial-spread-betting.com - it should help you a lot it you have time to read lol

 

[Robertral]

Guys I'm confused by your replies....
Spread betting is seen by the authorities as gambling,
are you guys saying there is no tax here??

Spread betting is TAX free...........remember that!!!!!!!!

 

[JonnyT]

Is it?

It's unlikely to be Tax Free for a professional trader as per case law.

JonnyT

 

[elliottmillion]

spread betting is completely TAX FREE. you don't have to tell the inland revenue anything about it!!!

i know this for a fact.

"Guys I'm confused by your replies....
Spread betting is seen by the authorities as gambling,
are you guys saying there is no tax here??"

Anyway, GORDON BROWN abolished gambling tax some years ago. but you didn't have to pay any tax on it when there was gambling tax anyway.

 

[Kilnside]

All the things that Sharky and Bonsai said plus

1. Controlled Risk

2. Simple admin

 

[darktone]

Theres been no real negatives posted about spreadbettung here so far (unless ive missed it )

so :-
1) Very basic trading platforms, inc poor charts.
2) Poor trade execution at market and orders.
3) By and large poor customer service, especially in the event of a dispute.
4)This last point may a personal thing, but when in dispute i always get the feeling they try and sway to their favour. Ok not a prob if you've experience (and screen shots ) but can be very disconcerting for a noob.

 

[dc2000]

Firstly let me say I am in no way against spreadbetting infact I regard it as an easy way for a novice to learn about the market.

With regard to the TAX situation DD and co are partialy correct ( I believe the IR jury are still out in City Traders case) spreadbetting is classed by the inland revenue as gambling and therefor does not incure income tax there is a caveat to this in that if your sole income is derived from said betting and is considered in excess of what you need to live you will be classed as a professional gambler and taxed acordingly.
Simply not telling the IR is not the sensible option. If trading is your only form of income firstly the National Insurance will write to you then the IR will contact you and you will need to provide previous years trading figures.

If anyone can prove different please do so you will need to show an SA302 that shows earnings from spreadbetting in excess of £50k with no tax payable.

 

[elliottmillion]

why £50,000

why not just over £5,000?

 

[LoopyLoo]

Totally agree with DarkTone find a lot of arrogance and aggressiveness with some of the spreadbetting companies (well IG to be specific can I say that)

Found it quite disconcerting when I first started. Is it just me or have others found that?

 

[Calvin]

LoopyLoo

I've only had dealings with one SB company - Finspreads - but I've found then pretty easy going (though I've not had any disputes, so they might have a dark side I haven't encountered yet!).

They do tend to assume you know what you are doing at first, but I found that when I explained I was a novice they were patient and happy to explain what was what. The one thing they can't do, of course, is offer any advice on which way to jump.

Finspreads seem to push 'approachability' as one of their selling points - maybe more so than narrow spreads (I keep meaning to run a comparison with other SB companies on the indices I trade, but haven't got around to it yet!). But as I say, I've never used any other SB companies, so I've no grounds on which to compare them to others....

As a side note, I now do most of my trading online, and the website never gives me attitude!

Calvin.

 

[Dave1971]

I have accounts with Cantor & Finspreads and used to have one with IG. I try to get some trading done from work, but because of the firewall can't use any of their online trading platforms, and the phone isn't practical because of the delay, and earwiggers in the office

I have just learned that Captail Spreads online platform is on a different format and not blocked by my firewall, and so have opened an account with them. It's early days but I have found the prices competitive and the online execution faster than the others.

As for the opening question, why spreadbet? I think it gives a novice or someone like me who is still finding the method that best suits, the flexibility to try many different things.

Dave