When a bullish investor buys shares they normally pay the full purchase price of say £5,000. However the same investor could choose to place an up bet on the underlying company, by buying a derivative like a spread bet, instead.
This time they will only have to pay a smaller initial deposit, or 'margin', of say 10% of the value of the shares to a broker- in this case £500. The subsequent up bet, agreed at say £10 per penny movement in the underlying share price, could go wrong if the share price starts to fall rather than rise as they originally hoped.
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