Once you master the basics of spread betting, it's well worth taking some time to explore the many ways a bet can be placed. For example, anyone punting on shares has at least three ways of doing it.
Single shares
Perhaps the most obvious way to place a spread bet is to pick a company and then put an up or down bet on the direction of its shares. The choice of companies available through a typical broker is huge and encompasses the UK plus overseas markets such as the US (so it can be a handy way to get cheap exposure to foreign shares). So for example you could choose to place an upbet on BP at an 'offer' price of, say, 433p for £10 a point (each 1p movement in the share price). If the stock rises, and the 'bid' price at which you close out the bet is, say, 455p, you make a gain of 22 points (455-433) at £10 a point. That's £220.
An index
Alternatively, you could bet on the direction of the wider market by betting on an index that represents a group of shares. Take the FTSE 100. You could open a bet at £10 per point when the 'offer' price is, say, 5,778 (points) and close it when your broker's bid price is, say, 5,790 (again, assuming you get the bet right and the index rises). If your bet size is £10 per point, you make 12 points (5790-5778) all at £10 per point, which is a profit of £120.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
A sector
If you like your group bets a little more targeted, why not pick out a sector, such as oil companies or miners, and bet on that? Pairs traders can go a step further. Say you believe that Tesco is the most promising stock among the food retailers. What you could do is place an upbet on Tesco and a downbet on food retailers. That way, if Tesco outperforms its peers while the two bets are open, you make money. In this instance, even if the Tesco price falls, as long as the food retailer sector falls by more, you'll still make money the key is that Tesco does better than the wider sector.
But always remember spread betting is very risky. In all three cases, should the bet backfire and the relevant share or index start to drop, you can lose money fast. So always keep bet sizes low initially and use stop losses to limit any potential damage.
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
