New to Spread Betting? Then check out this short guide to get a basic understanding on the topic.
Spread betting differs greatly to any other mainstream form of gambling and many people consider it to be more a likened to trading than actual gambling.
A company will offer a spread which is a range of prices (buy and sell).
If you think the price of a market will rise you will 'buy' and on the flip side, if you think it will fall then you can go 'short' and 'sell'.
You simply state a value of a point that you feel comfortable betting and you are then you either make a profit or loss depending upon whether the market rises or falls.
As you can see, this is completely different to other types of gambling where you would state an outcome and get paid whether you were right or wrong.
Spread betting however is all about being accurate and the more accurate you are the more you win, and on the flip the more you are wrong, the more you lose.
People use this derivative for varying reasons.
Some people use it as a hedging mechanism.
For example if you own shares in a company that you think are going to fall, you could defend your share holding position by 'shorting' the company and wagering on its price reducing.
Needless to say, the best way to learn the topic is to get your hands dirty and sign up for account.
It is highly advisable though for you to sign up for a demo account first.
This will allow you take part in this form of gambling and learn the ropes before committing any of your own money.