There are several reasons why traders and investors incorporate financial betting in their armoury when it comes to generating a return from investments. Whilst clearly not without risk, there are several advantages to financial betting over and above those of investing in the underlying asset.

You can make money if the stock goes down as well as up, meaning there are more opportunities to make a profitable trade. It offers the possibility of profit in a bear market, which given the current economic climate is no bad thing. There is also the chance to make greater profits in a volatile market. If a market is experiencing two hundred point swings on a daily basis, there is some serious gains to be made.

The opportunity to make returns extends beyond simply whether a share price goes up or down and there is an ever growing number of bets available. These include a double touch, whereby a share price has to hit a predetermined high and low from its current position, and a no touch, where the share won’t hit the price selected.

Bets are not restricted to shares. Indeed betting on individual shares makes up only a small proportion of betting possibilities. Opportunities exist to trade just about almost anything, but the most popular markets currently include share indices such as the FTSE or DOW, foreign exchanges and commodities.

This isn’t limited to the UK market but extends to other major indices and markets around the world. These markets offer global exposure, not to mention round the clock trading. Remember, when one market closes, another one opens and so if you wish, you could be trading twenty four hours a day. Although a word of caution, if you have lost some money don’t keep trading to try and chase the losses. There will always be more opportunities the day after.

The returns on offer for bets, in percentage terms, can be much higher than those from trading the share. A share might go up 10%, whilst the bet gives a 40% return. Of course if the bet fails then the stake is lost, unlike a share where it’s unlikely the share will lose all its value. Because of the extra risk a potential higher return is required.

Transactional costs are lower. Share trading incurs a transactional cost, and although they’ve come down in recent years are still around £10 per trade when using an online stock broking account.

Share purchases also incur stamp duty, currently at a rate of 0.5% of the purchase cost. Depending on whether the stocks are held in a tax-efficient vehicle such as an ISA or a pension, the shares may also give rise to a capital gains tax charge.

Financial betting doesn’t incur such charges and the returns are tax-free. Instead the betting company makes its money through the spread that is quoted for the trade.

The benefits are there to be seen but, as with all betting, only stake what you can afford to lose and remember financial betting isn’t for the feint hearted!



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In such volatile times there will always be opportunities to make a profit and plenty of opportunities to lose more.

One industry that has been thriving is the spread betting industry. Whilst there is currently a ban on shorting financial stocks, investors are still enjoying the ability to buy and sell indices like the FTSE 100, thousands of other stocks and shares, forex markets, crude oil, gold etc. etc.

Naturally many investors like the fact that there are no commissions or brokers fees and that spread betting profits are tax free*.

That is all well and good. Although at this point I should mention that spread betting is not a one way street, it carries a high level of risk to your funds. You can lose more than you initially invest. It does not suit all investors.

In short, you should only speculate with funds that you can afford to lose. And, like the adverts say, ‘ensure you understand the risks and seek independent financial advice if and when necessary’.

The above pros and cons are not the only considerations in today’s volatile market.

For the investors across the world there are further important considerations:

1) Am I trading on a stable platform? If I need to make a trade or close one now will the platform be up and running or down for ‘essential maintenance’?

2) Are my funds safe? Or if the company in question goes bankrupt do I lose everything I have on deposit?

3) What happens if I trade on a particularly volatile day? How can I reduce my downside?

These are questions you should be asking yourself in order to help minimise your risks.

Most of the big, established spread betting companies answer these questions quite well.

For example, IG Index recently reported, “during one week in October we took over 700,000 trades in a period of high volatility, but our platform was 100% reliable with absolutely no downtime”

What about my funds on Deposit?

FinancialSpreads.com, IG Index and the other established firms segregate your funds in a designated account. The account is ring-fenced from trading activities and covered by the Financial Services Compensation Scheme to make sure your money is safe.

What happens if I trade on a particularly volatile day? How can I reduce my downside?

Again, the spread betting companies have moved on from the days of ‘if you lose, unlucky’.

The firms now offer a variety of options. FinancialSpreads.com, for example, attaches a Stop Loss to every single opening trade you make. So if your trade goes wrong your bet will be closed out when the market hits the Stop Loss. It should be noted that Stop Losses are not guaranteed, eg if the market gaps then your trade will be closed at the next level the market trades at.

One of the ‘relatively new’ companies, ShortsandLongs, has gone one step further and attached a Guaranteed Stop Loss to every single opening trade you make. I say ‘relatively new’ because ShortsandLongs is a new service but operated by Spreadex. Spreadex is an established operator that has been in the market since 1999.

The Guaranteed Stop Loss works just like a Stop Loss. If your trade does not go according to plan it will be closed out when the market hits the Guaranteed Stop Loss. However, if the market gaps then your trade will still be closed at the level of the Guaranteed Stop Loss, not the next traded level.

A number of companies, now offer Guaranteed Stop Losses. The trade off is often a slightly larger spread however that can be worth the peace of mind (and…reduced risk).

In such volatile times there will always be opportunities to make a profit and plenty of opportunities to lose. Make sure you are not losing money for the wrong reasons.

* Tax law can change and/or may be different if you pay tax in a jurisdiction outside the UK.



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