In the investment world, there are many different ways that you can earn money. Whether it be through forex trading, watching the financial stock market movement, or trading CFDs, there is almost something for everyone.
Another way for you to earn a bit of side cash is by spread betting. If you’re new to spread betting, we’re going to break it down to help you get started.
What is Spread Betting?
As mentioned, spread betting is a type of investment in which you try and earn a return. Typically you purchase a share or a contract and try to sell it at a higher price. But with spread betting, your speculating the price movement of a chosen market.
With spread betting, you’ll want to find a reliable spread betting broker to help you out. You’ll want to make sure though that when you place a bet, it actually goes to the market. Some brokers have you betting against them, rather than the market itself.
What is the Spread?
The spread is the difference between the selling price and the buy price. If you invest in the market when it’s at $10 and sell when it goes up to $15, the spread would be $5. Whether the market increases or decreases, the difference from when you opened your bet to when you closed it, that would be the spread.
How Does Spread Betting Work?
There are two ways for spread betting. The first is when you go long on the price of a trade. That means you think the price will go higher than what it’s currently sitting at, so you buy at that price. For example, you speculate Stock A to go up in value, so you invest $20 for every point the stock gains. As the market continues, Stock A gains 15 points. Your return then is $300. If Stock A went down 15 points though, you would be out $300.
The other way you can get involved with spread betting is to buy going short. If you expect the price to drop lower than what it initially is at, you would then sell your trade, or short it. However, if you are wrong with either going long or shorting, you’ll lose everything you invested. Continue with our Stock A example, you bet $20 on every point the stock will fall in the market. As the market goes on, Stock A goes down 10 points. You then walk away with $200.
To start off, you must put down a deposit known as a margin. The margin is there to cover any potential loses you incur.
Should Your Start Spread Betting
Because you can both short or go long with a stock, that makes spread betting appealing. It allows you to invest in different ways. Also, many jurisdictions consider spread betting to be gambling which means it is exempt from certain taxes.
With spread betting though, you can easily win money. The downfall though, you can just as quickly lose everything. It’s a risky way to invest, but it can also have a high payout. It’s up to you if you want to take the risk.
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