Many people find that spread betting is too complicated for them to understand, but when it is explained in a simple manner, it is often found to be less complicated than first thought – and a lot of fun.
As an example of how financial spread betting works, look at the FTSE 100. This is often used for spread betting by experts. However, you can try your hand at financial spread betting or currency spread betting through a spread betting company.
The spread betting company will offer you a spread that applies to the FTSE 100. This spread will be a range of points, for example between 3000 and 3200. You can then bet on how you feel the FTSE 100 will perform, as in whether it will go up or down.
If you’re of the opinion that the FTSE 100 will perform well and increase, you could buy at the top end of the estimate – for example, £10 per point at a value of 3200.
You will make a profit then if the FTSE 100 increases to over 3200, £10 per point. If the FTSE 100 were to close at 3500 you would earn £10 for each point, which is £10 times 300 – £3,000 profit.
As with all forms of trading, spread betting comes with risks. Should the FTSE 100 fall in value you would lose £10 for every point. You can also ‘bet’ that the FTSE 100 will fall in value, and make money on that too.
Spread betting allows people to bet on how they think the financial markets will fare.
