Financial Spread Betting and Forex

A spread can be termed as the difference the asking price (buying price) and the bid price (selling price). Financial spread betting is an investment option/vehicle that enables investors to invest in shares and stocks while at the same time making speculations on the probable changes in the financial markets. It’s a binary bet where the investor hopes to gain in the future for the present investment.

The foreign exchange (forex) market is a highly volatile market which means that investors need a hedge to shield them from making losses whenever the market is not favorable. Spread betting is a way of gaining maximum benefit from a forex market considering that it’s a very liquid market (turnover in the US has hit the trillion mark). The leverage is important because unlike the other markets like stock trading, the forex market is not subject to the bearish and bullish markets. Thus there may be a tendency of the brokers taking advantage of this to exploit clients. The spreads can be fixed or variable. The fixed spreads are safer as they cannot be manipulated by brokers. In order to gain from trading in forex market, the spreads should be as low as possible. Thus there is need to compare the spreads offered by different forex brokers.

Financial spread betting offers many benefits to the investors. Like most terminal incomes from trading in securities, the capital gains from spread betting are not liable to taxation. So if an investor sells shares at a price higher than he bought them, this amount will not be charged at all. However, capital losses cannot be offset against one’s tax liability. Being a derivative, no stamp duty is chargeable.

The financial spread betting offers investors with a wider range of markets where they can invest. The underlying asset can range from stocks, bonds as well as import and export products. The investor can also indulge in the forwards and futures market.

It also allows the investors to go long or short such that they can sell or buy the underlying asset in line with the market forces; i.e. sell when prices are high and buy when the prices are low. Thus if the underlying asset is stock, the price changes in the stock market will determine whether the investor goes long or short.

Operating a financial spread betting account requires lower levels of capital as the product is usually leveraged. Thus investors are able to trade shares of whichever the underlying asset is at margined prices because the spread betting is offered at a percentage margin thus the investor will only pay the margined price for the shares. For instance, if shares were trading at $50 and the margin rate is quoted at 10% then the investor will buy the shares at a reduced price of $5.

Is Horse Racing Betting a Good Investment And How Does It Compare to the Stock Market?

Wagering on horse races and making a profit, perhaps even a living, is a dream shared by many people. It takes a sizable bankroll to become a professional horseplayer, however and the risk of losing everything is a very real concern. This begs the question, “Should I invest in horse racing, betting on horses and trying to pick enough winners to come out ahead, or should I put my money into something else, such as the stock market, annuities, etc.?”

I’m not an economist, professional money manager, or investment counselor. I can only tell you what I know about horse racing after years of being a horseplayer. The game is constantly evolving and some of the recent developments have made it more challenging as an investment. Yes, it is possible to find value bets in the pools, but they aren’t as common as they once were.

Investors on Wall Street have to deal with large financial institutions that use computers to make lightning fast trades and suck the profit out of the stock market. Believe it or not, the same thing now happens at some race tracks. There are new players in the game. They hire computer wizards and crunch numbers and data to evaluate the runners in each race and then use their own betting terminals to place computer generated wagers directly into the pools a fraction of a second before the pool is closed.

As if that isn’t bad enough, some of the tracks want their action so they offer them incentives, usually some form of rebate, in order to get their business. The result is that the bet that costs you $100 may cost the company that uses computer robot wagering (CRW) a fraction of that, perhaps as little as $80. It’s not really pari-mutuel wagering at that point. “Pari,” means equal and pari-mutuel means that bettors receive an equal share for their investment in the pool, but your winnings on your $100 wager only return the same amount as the wager the CRW made and then the track gives them an extra bonus so they’ve made a higher return on their money.

You don’t have to be a financial wizard to see where that will lead you as you make multiple wagers and churn gradually eats up your bankroll. I don’t want to discourage you because horse racing needs all the players it can get in order to survive and I am a horseplayer, but you should know who your competition is and how they are playing. You wouldn’t sit down at a poker table without knowing who the other players were and if one of them didn’t have to ante up in order to share the pot you wouldn’t stay in the game.

I’d have to say that if financial reward is your only goal there may be better investments, however, if you enjoy handicapping and betting on horse races, then that incentive along with the possibility of making a profit may be enough to keep you in the game.

Investment Facts Regarding Binary Betting

Binary betting offers the ability for investors to place wages on highly volatile, fast moving markets with controlled risk management. The trader knows what their maximum loss or profit will be when placing their bet. There are many important facts that all financial spread betting investors should know when using binaries as listed below.

1. Binary betting places a marriage between the enthusiasm and excitement of sports betting to the volatility of financial arena and the various markets.

2. Although rarely used binaries may hold longer expiration dates, even up to years. However shorter bets or contracts are more often used due to better odds for speculators.

3. One can say that binary betting is a method of fixed-odds betting, the investor will either use of a yes or no answer to the question ‘will XYZ be up ‘said points’ from yesterday at closing?’ The investor is speculating on the outcome and taking a spread on if something will or will not happen.

4. The spread broker will quote the odds, which allows you to know what your maximum profit or loss will be upon placing your wager.

5. Most top financial spread betting brokerage firms will offer their client base the ability to use their account for binary betting.

6. Binary betting is not regulated by the FSA (Financial Services Authority) whereas financial spread betting is.

7. The actual bet will always be a number from 0 to 100. Each number will be quoted with varying spreads/odds.

8. Generally binary bets can be made on Commodities, Forex, Currencies and Indices (such as FTSE), Stock Markets, etc.

9. Dependent upon the market, a deposit will need to be added into the bettors account; an example would be the FTSE, the trader would need to have funds in their account which is equivalent to taking the NTR (Notional Trading Requirement) which will be multiplied by the amount of your bet.

10. Binary betting is quoted for both the buy and sell.

As you can see, binary betting offers the investor many opportunities to trade in the fast and volatile market movements however, avoiding the same risk as other markets. Many seasoned investors will use this product as it offers them a lower risk and allows them more control over their money management. If you do not quite understand the way this product works, or to try your hand at it without spending your actual money, many brokerage firms will offer virtual trading, where you can open a demo account and learn the operation.