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Investing Strategies: Spread Betting - The Pros and Cons

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    • CommentAuthorPaddy
    • CommentTimeJan 9th 2007
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    I saw an interesting post on another forum earlier regarding spread betting. The writer was espousing the virtues of spread betting but I'd like a more balanced discussion and whether it is actually worth using as an investment strategy. What does everybody else think?
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    OK - the pros are that it can be a very safe way of investing if used in the right way, and is a cheaper method of investing in general. As it is considered betting there is no capital gains or stamp duty to pay on it. You can also work all of your other investments around it.

    The cons include the potential to lose a lot of money if you get greedy or don't understand the odds. Too many people spread bet without doing any research and don't fully understand what they are doing, which is why they lose.

  3.  permalink
    Consider spreadbetting playing with many times your stake. e.g for a €10 per point on the Dow long or short a 10% gain/loss in the Dow at say 10,000 is equal to 100 points. This 10% move is equal €1,000 gain/loss. To return €1,000 on a 10% gain in a standard share purchase would require €10,000 invested.
    • CommentAuthorPaddy
    • CommentTimeJan 10th 2007
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    Wow - I do not like those odds one little bit! When you read about it, it sounds like such a positive thing to do but obviously not. I don't have that much to invest so any losses that I would take from it would be impossible to get back.
    • CommentAuthorIseqindex
    • CommentTimeJan 10th 2007
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    That's why you must be knowledgable and know what you're doing before dabling in spread betting though. It is only unsafe if you have no clue what you're doing, which unfortunately is the state that a good percentage of people that venture into it are in. There are courses available to educate prospective spread betters so they are fully aware of the risks and have a working knowledge before they begin. 
    • CommentAuthorbigspender
    • CommentTimeJan 11th 2007
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    Spread betting is speculative and many don't even consider it investing as such. It shouldn't considered a foundation of investing by any means. If anything, it should be a sideline. Most true investors won't actually touch it with a barge pole.
    • CommentAuthorIseqindex
    • CommentTimeJan 12th 2007
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    If you think about it, although it's tax free, you lose more than you gain over a longer period of time. It is betting and so the odds are stacked against you rather than in your favour. The bookies always take their cut and wouldn't offer it if there was a slight chance that they would not make money from it.
  8.  permalink
    I saw a post on another forum yesterday that made complete and utter sense to me. Don't invest in spread betting, invest in spread betting companies! I never thought about it before but it makes complete sense because they are the only ones who benefit from the whole practice!
    • CommentAuthorPaddy
    • CommentTimeJan 12th 2007
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    If it is offered by the bookies then it stands to reason that people who do use it for investment purposes are the losers. I hate giving the bookies my hard earned cash so maybe I should stay away from this then. My horses never come in!
    • CommentAuthorbigspender
    • CommentTimeJan 12th 2007
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    Hmmm, wouldn't investing in a spread betting company sort of be like betting on the bookies? Not a bad idea because they never lose so it would be difficult for you to. This would certainly bypass any problems understanding the odds and negates the need for extra research.
    • CommentAuthorIseqindex
    • CommentTimeJan 12th 2007
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    Investing is gambling, whether it is done in the form of spread betting or not. Spread betting is simply a way of decreasing your chances of winning in my opinion. You can look at form guides and analysis as much as you want but you are more likely to lose on spread betting than any other form of investment.
    • CommentAuthorfirefly
    • CommentTimeJan 17th 2008 edited
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    Ah now come on none of you really seem to have a clue what you're talking about. All this "The Bookies always win" nonsense. I think your listening to your mammy too much.

    Spreadbetting companies make their money from commission and larger-than normal bid/ask spreads. They take real positions against the positions that you take. The odds against you are your knowledge of the markets and your timing of entering and exiting positions.....

    The margins work very similar to CFDs, enabling you to have large exposure for a smaller price.....

    You'll lose if you haven't a clue what you're on about....based on this I wouldn't recommend any of you try....

    For those of you interested..open up a trading simulator (on delta or worldspreads) and see how you get on...

  13.  permalink
    spread prices are now skewed - it would be ridiculous for spread betting companies to move spreads around between that would open arbitrage opportunities - see the question '<br /> <h2>'Do you ever skew spreads/prices?' at the link below<br /> </h2> http://www.financial-spread-betting.com/Capitalspreads-industry-faqs2.html

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