Graham_S
03-22-2009, 12:18 PM
A comment came up in Neal's webinar yesterday ref Spread Betting, and as a Brit, I suppose I take it for granted, so didn't realise that people wouldn't know what it is. One joking comment was about using s/betting to take an easy punt on the markets - which it isn't! Here's a brief resumee to allay ant misconceptions it's gambling.
There is sports spread betting and financial spread betting - of course we're talking financial here.
You can spread bet exactly as you would normally trade thru a broker - with gay abandon, or as a serious trader. It is illegal to spread bet in the US and I believe, even in some parts of the EU. Don't know about the rest of the world. Haven't got a clue why it is illegal cos the principle is exactly the same as opening an account and trading thru a broker - using the same order types/marginrequirements/direct dealing etc. You're not buying the underlaying instrument, but a deritavie. In theory, they lay your trade off in underlaying market. In practise (allegedly, and always denied) for small trades and newbies they won't lay your trade off, but keep it in house - why collect only the spread when they can collect the premium as well from a majority of losing trades. Which is why, like a lot of brokers, they don't like scalpers as they haven't time to lay off the trade if u are a consistent winner!
Companies like IGINdex and finspreads are the big boys and these are moving into more main stream trading products - but fx brokers like GFT have moved into spread betting!
The advantage to us Brits is that it comes under the 'betting' banner, which makes all the winnings tax free until you can''t persuade the treasury that it's not your primary income any more. Also, if one of the big boys like IGIndex is used, there is a choice of thousands of instruments from around the world: indices, fx, commodities, funds - spots and futures. Also a couple like IG anf GFT have v good live charting packages for all their listed instruments without costly exchange fees. Also, everything is done on a spread - no commissions. The fx and main indices and more traded shares have very tight spreads, but u need to watch things like copper. There is no set contract size, so you can trade (bet) from 0.50 - 1gbp per pip/point/tick up to in theory 100gbp per pip. There comes a point in trade size where it is cheaper to pay the commission rather than the spread and some companies start to cough or require dealer intervention.
There are a lot of full time traders who use spread betting all the time, now.
Of course there are the not so good companies that continually run stops, freeze your s/ware if you're winning etc, but that's the same all over.
Additionally there are binary bets, binary options and similar - not sure whether these are illegal in the US.
Cheers.
Graham.
There is sports spread betting and financial spread betting - of course we're talking financial here.
You can spread bet exactly as you would normally trade thru a broker - with gay abandon, or as a serious trader. It is illegal to spread bet in the US and I believe, even in some parts of the EU. Don't know about the rest of the world. Haven't got a clue why it is illegal cos the principle is exactly the same as opening an account and trading thru a broker - using the same order types/marginrequirements/direct dealing etc. You're not buying the underlaying instrument, but a deritavie. In theory, they lay your trade off in underlaying market. In practise (allegedly, and always denied) for small trades and newbies they won't lay your trade off, but keep it in house - why collect only the spread when they can collect the premium as well from a majority of losing trades. Which is why, like a lot of brokers, they don't like scalpers as they haven't time to lay off the trade if u are a consistent winner!
Companies like IGINdex and finspreads are the big boys and these are moving into more main stream trading products - but fx brokers like GFT have moved into spread betting!
The advantage to us Brits is that it comes under the 'betting' banner, which makes all the winnings tax free until you can''t persuade the treasury that it's not your primary income any more. Also, if one of the big boys like IGIndex is used, there is a choice of thousands of instruments from around the world: indices, fx, commodities, funds - spots and futures. Also a couple like IG anf GFT have v good live charting packages for all their listed instruments without costly exchange fees. Also, everything is done on a spread - no commissions. The fx and main indices and more traded shares have very tight spreads, but u need to watch things like copper. There is no set contract size, so you can trade (bet) from 0.50 - 1gbp per pip/point/tick up to in theory 100gbp per pip. There comes a point in trade size where it is cheaper to pay the commission rather than the spread and some companies start to cough or require dealer intervention.
There are a lot of full time traders who use spread betting all the time, now.
Of course there are the not so good companies that continually run stops, freeze your s/ware if you're winning etc, but that's the same all over.
Additionally there are binary bets, binary options and similar - not sure whether these are illegal in the US.
Cheers.
Graham.