Financial Spread Betting is method used in the financial arena to take a guess on how the market for trading stocks, bonds and other commodities is going and try to make money. It is similar to spread betting in sports, but works a little different in this venue.
Definition and purposes,
Financial spread betting is intended to develop an active betting market for both sides of some event, such as whether a stock will go up or down in price. It is supposed to be even odds on both sides and the bookmaker can move the spread however he wants to make this happen. As long as he keeps things even on both sides, he makes money from a commission fee he charges and the winning or losing does not affect his profits. Even so, he must pay off winners less than that commission price or he will still lose money.
Spread betting is more dangerous than fixed odds betting because there is not a single stake to limit your loss or your potential profit gain. You can, however, negotiate the bookmaker if the stock market is falling, using spread betting can be a means of hedging against possible losses in your stocks and bonds portfolio.
Spread Betting terms
A "stop-loss" closes your bet if the spread you choose edges against your bed by an agreed upon amount. A "stop-loss" or "take profit" will also close the bet if the spread does the opposite and goes in your favor by a certain amount.
Ownership of the stocks not necessary
In order to participate in financial betting, you do not even have to own what you are betting on. All you have to do is be able to make a prediction on whether it will go up or down and bet respectively. Then, you are quoted two prices, a bid and an offer price or the spread. You choose whether or not the price goes up or down and win or lose accordingly. Here is a quick example;
If you are doing spread betting on stock and the bookmaker give you a bid quote of $ 200 and an offer of $ 203 and you think the stock will sell for less than $ 200, then if you betted $ 2 for each dollar it goes under the $ 200 you would win $ 20 if the stock fell to a price of $ 190
Just like any sort of gambling, this type of betting can be addictive if you are not careful. In fact, studies have shown that this type of betting can be much more addictive than regular straight odds better, there are quite many who's gambles that chose this type of past time developing serious gambling problems, while only 1 percent of those doing straight odds betting became addicted.
This kind of betting is a practice where someone bets on the odds of something happening either positive or negative. It is used in financial markets to predict the way that stocks or bond prices will go on a given date. It can reap great rewards, as well as cause betters to lose a lot of cash and can become addictive if they are not careful.