Financial Spread Betting Guide
How it works and its history. Whether you are new to Financial Spread Betting and just want the basics or want more detailed information learn more about Financial Spread Betting.
In this module we're going to look at the basic arithmetic around how we can make money from spread betting.
But how does spread betting compare financially to share dealing?
Let's take the equity market.
Say we've decided to buy 1,000 BP shares.
The Buy price of these shares is 435.00p and we wish to purchase 1,000 shares, therefore, our initial outlay is £4.35 x 1,000 which will cost us £4350. Plus we have to pay a commission charge of £15 and 0.5% stamp duty which for this purchase would cost us £21.75. Therefore, our total outlay to buy 1,000 shares is £4386.75.
It's important to understand the risks before we start spread betting. In particular how we calculate our outlay and the potential additional costs should a trade go against us.
Spread betting is a form of margin trading also referred to as leveraged trading or gearing. This is where our initial outlay is a percentage of the actual trading amount, but we still get 100% exposure in the market.
We have talked about methods to manage risk when spread betting so join me in the next module to find out about the NatWest Research Centre.
Now that we've covered the basics of how to trade, our next big decision is: What should we trade, a stock, a currency, maybe an index?
Obviously we can't tell you what to invest in but NatWest do give access to a wide range of information. This module is all about the NatWest Research Centre and some of the tools that are available to help traders make more informed trading decisions.
Financial Spread Betting is a way of investing in a financial market such as the FTSE 100 or Dow Jones, or in shares, bonds, commodities or foreign currencies, without you actually buying or owning them.
It allows you to speculate on whether the value of a market, stock or commodity will go up or down.
With Financial Spread Betting you don’t pay UK tax on profits, although tax laws can change. Also you don’t have to pay stamp duty or commission.
Whereas the traditional way of investing in shares is to buy a share in full, with Financial Spread Betting you can place a bet by paying a deposit, known as an initial margin. The exact size of this margin depends on the type of asset you've chosen to bet on, but it ranges from 1% - 10% of the total value of your position or liability.
With Financial Spread Betting gains and losses can be magnified and you could lose more money than the initial margin you paid so you should only invest what you can afford to loose.
Financial Spread Betting carries a high level of risk to your capital and may not be suitable for all investors. Make sure that you understand the risks involved and seek expert professional advice, if you need it.
Now that we've covered the basics of how to trade, our next big decision is: What should we trade, a stock, a currency, maybe an index?
Find out more about Financial Spread Betting including its history, how it works and some of the risks by visiting the Learning & Research pages on natweststockbrokers.com