Financial Spread Betting (or Trading) offers a tax-free method of speculating on the financial markets.
Quite simply, if you think a particular index, share, commodity, currency or sector will rise, you place a bet UP. This is also referred to as a Long position or a buy.
On the other hand, if you think that the specific market will fall you place a bet DOWN (commonly referred to as a short position or a sell).
The amount of profit you make money or you lose depends on how good or bad you were and how much you risked per point.
At the time of placing the bet you decide how much you want to risk per point. This can be as little as £ 0.01 or a large amount as £ 1,000 +.
Most bets work on a daily, or contract month rolling basis.
A daily commitment is one that is only open during a given trading day. You could trade place at 11 am and, if you do not close, before it will be closed. At the end of the trading day (4:30 in the case of the FTSE 100)
A Rolling bet is one that, unless you indicate otherwise, rolls to the next trading day. This costs a little money and your bookmaker should be able to give you more information.
A trade opened for a particular contract month will end at 3 months in the future. A specific date when the contract ends known as the date or the last trading day.
For example, if you enter a trade on the FTSE 100 September contract opened, the expiry date will be in September, usually the third Friday. The trade will expire at the close of business on that day.
Some bookmakers also run other types of bets, such as weekly and "End of the year".
Day-traders or "scalpers" will tend to use daily or Rolling bets but as a beginner may be wiser to trade over a longer term.
If you decide to day trade, keep in mind that you should be good to profits almost immediately. If you select a longer time scale, you have some breathing room for the trade to run.
An example of a commercial
It's June and the FTSE 100 is trading at about 5000 and you are convinced that it will be higher for September. To comment you decide to use behind a spread bet.
Sign in to your Internet account, the bookmaker quotes you 5010-5020 for the FTSE 100 September contract.
This means that you can buy (go long) at 5020 or sell (go short) in 5010.
Spread betting odds are always displayed as two separate prices. You buy at the higher price and sell at the bottom. The "spread" itself (in this case 10) is a charge added by the bookmakers. Different companies have different spreads, some bigger than others.
If you would you buy £ 1 a point (or as much as you want) in 5020. The back of the market to go higher,
September arrives and you are close to the expiration of the contract.
Instead of waiting for the last trading day you decide to take as the FTSE 100 is now quoted. 5305-5315 on your profits
You close your position by selling £ 1 per point at 5305.
As you rise was correct in thinking the FTSE have now won £ 285:
(5305 - 5020) x £ 1 = £ 285 tax
There is no need to hold on to the end, you can close your position at any time to take your profits or limit your losses.
If the FTSE was trading at 5,500 in July, you could have closed for more than profit. All you have to do is log into your account and place to close. Another trade in the opposite direction for the same amount per point
Of course, if the FTSE had gone down in this example had lost money but you can use stop losses to limit the damage.
Ben Catt is an active financial trader and runs a free website with hints, tips and information about tax-free trading and financial spread betting in the UK. The site can be found at He also runs a business opportunity information site -
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