Below you will find information on Spread Betting.


What is Financial spread betting?

Financial spread betting is one of the simplest way of trading on a financial market. It allows the investor to speculate on price movement of shares, indices, commodities and exchange rates.

Like CFDs, spead betting is a derivatives instrument and the spread better is not required to buy the underlying product. He or she can profit from a falling market as well as a rising one.

Sport spread betting is offered by numerous companies in Australia but it is not classed as financial instrument it works similarly but is purely for betting on sports.

How does Spread Betting Work?

'Bets' (speculative guesses) are made with a specialist financial broker they usually offer CFDs as well as spread betting. The broker will offer the investor a spread, based on the current selling quote and future buying price that it determines.

Next, the investor takes this price and speculates on the direction of his chosen index value or share price. He can decide to 'bet' that the price will rise in which case he makes a bet from the offer (or selling price). If he decides to 'bet' that the price will go down in which case he makes a bet from the bid (or buying price).

What's the Difference between CFDs and Spread Betting?

The two types of investment trade sound very similar and indeed they are. But unlike CFDs traders, the spread better does not need to pay commission that's the main difference. Financial spread betting brokers generally 'swallow' commission. They can do this because they offer a slightly wider spread than the actual market price.

CFDs are free of Capital Gains Tax in Australia, while spread betting is a little less clear see below!

Is Financial Spread Betting Taxed?

In Australia, the rules on financial spread betting with regards to tax are a little cagey. IG Index recommends that investors "...seek their own tax advice". According to some reports, the Australian Taxation Office is still reviewing the tax status of spread betting.

However there are international companies listed in Britain that can handle Australian customers. They offer the same high-tech platforms which they offer their UK customers just take a look at the ones listed on Which Way To Pay Australia.

To find out exactly how you are affected with regards to taxation on your trades, please speak to the broker directly.

How Much does it Cost?

Financial spread betting allows investors to trade derivatives without large amounts of capital. In addition, there is no commission fee.

You can bet with as small amount as $5 per point (each point being worth a cent) which means if you win, you get $5 for every point your bet has gained. The same goes for a loss only you will lose $5 for every point.

Is Spread Betting Regulated?

Every company offering financial spread betting services should be financially regulated within the country in which they are registered. If you are using a UK-based company, they will be regulated by the Financial Services Authority (FSA) and will have a registration number to prove it. Some countries are based in locations like Gibraltar and will be regulated locally.

While there are comparisons between financial spread betting and gambling, it is officially classed as a financial derivative instrument and as such the firms that offer it must abide by strict rules and guidelines.

What are the Benefits of Financial Spread Betting?

There are many upsides to spread betting. They include:

  • Commission-free trading
  • Easy to understand the logistics
  • Make profit on rising and falling markets
  • Access many global markets
  • Fast trading
  • Can start with small amount of capital
  • Requires less trading experience than other forms of trading

Are there any Disadvantages?

As with any investment trade or financial instrument, there are one or two setbacks to financial spread betting. Here are some:

  • High risk exposure
  • Volatile markets
  • Can make large losses

Are there Risks?

While financial spread betting offers an exciting and even fun way to trade derivatives, you should be aware of the risks before you start. In fact, it could be worth seeking independent financial advice to find out if this type of investment trade is suitable for you.

It could be said that financial spread betting is not suitable for newcomers to the investment trade world, as it is so fast-paced and volatile. As a spread better, you stand the chance of:

  • Losing a large amount of money fast
  • Losing more than your original deposit
  • Might have to pay more in the event of a loss

Make sure that you only trade an amount of money which you can afford to lose.

It is highly recommended that you open a 'demo' or practise account with a broker before opening a real one. This allows you to practise on the markets with virtual funds this can help to test how advanced you are, and what your chances look like. If you find that you are having trouble, seek further research and training.

Your broker might offer you the option to order a stop loss on each position (or bet) you open. This will stop a losing position carrying on beyond a pre-decided amount. This does not guarantee that you will prevent a loss and might cost extra but could be worth it to stop a loss from going too far.

What is Binary Betting?

Binaries are offered by many financial spread betting brokers. It works on a straightforward 'yes' and 'no' principle. The better knows in advance what they can win or lose, so binary betting is seen as being somewhat less risky than spread betting.


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