# Financial spread betting



## Paul d (29 May 2007)

Can anyone recommend a good site (maybe one that includes a simulator) or book on the subject of financial spead betting?

What are etf's?

Thanks,

Paul d


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## markowitzman (29 May 2007)

> What are etf's?


does not inspire confidence if you are looking to go into spread betting and not know what etfs are.
Try doing searches on AAM. Hold off on the spread betting until then.


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## boaber (30 May 2007)

Delta Index are starting a new simulator on Friday

[broken link removed]


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## Paul d (30 May 2007)

Not looking to inspire confidence in you Markowitzman!
Trying to learn about a new subject?
Have you ever done that?


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## gonk (30 May 2007)

markowitzman said:


> does not inspire confidence if you are looking to go into spread betting and not know what etfs are.
> Try doing searches on AAM. Hold off on the spread betting until then.


 
The OP didn't say (s)he was looking to go into spread betting. (S)he asked for information on the topic. With that information it will be possible to make an informed choice one way or the other.

There's some basic information here, on IG Index's site:

[broken link removed]

Their dealing handbook contains more detail on the different kinds of bet:

[broken link removed]

Using the simulator would be a good idea too.


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## Paul d (30 May 2007)

Gonk,

Thanks for that. At least you read the question.
Saw the new simulator on the advertised in the delta site. Will give it a try.


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## Paul d (31 May 2007)

Luckystrike,

Thanks for that, will have a read through the site. Have been reading like hell since posted the first thread. Also arranged a tutorial with delta index. Will be taking this whole thing very cautiously but would like to at least check it out.


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## diarmuidc (1 Jun 2007)

Paul d said:


> Trying to learn about a new subject?
> Have you ever done that?


What he is probably suggesting is to try learning to walk before you run.


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## gonk (1 Jun 2007)

diarmuidc said:


> What he is probably suggesting is to try learning to walk before you run.


 
Indeed. Which is presumably why the OP asked for general information. What he did not ask was which is a good spread betting firm to punt his life savings with. Why do you think he's trying to walk before he can run?


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## hattrick_12a (2 Jun 2007)

Her is a topic on *Courses in investing & trading*

http://www.askaboutmoney.com/showthread.php?t=52316

This's where I learnt about  

I am currently reading their tutorial, that you have to sign up for, which Ive learnt a good bit about spreadbetting, but I was a complete novice in this area. But it has raised some questions for me.  The main one being that it seems more like gambling to me? Also it seems to be more for the short term, from what I can gather, whereas other investments are more long term i.e. the various ways there are of investing in shares.  A plus that I have found is that no tax is paid on profits....But after what I have learnt so far I would deffo give it a shot but only on a simulator at first and then maybe a few euro on the real thing.


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## Vodka_girl (4 Jun 2007)

There is a free €20 bet with some company mentioned in this thread

[broken link removed]

That moneytalk site also has an article explaining all about spread betting.

I have already used my €20 hope you have better luck.


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## gonk (4 Jun 2007)

hattrick_12a said:


> Ive learnt a good bit about spreadbetting, but I was a complete novice in this area. But it has raised some questions for me. The main one being that it seems more like gambling to me?


 
All investments are to some extent a gamble. Even putting cash on deposit, you're gambling the after-tax interest will be enough to preserve the inflation-adjusted value of your money (and in recent years this has mostly been a losing bet . . .)

The main risk with spread-betting as distinct from other methods of investing is that it is possible to take highly leveraged positions. This is great if the market goes the way you want, but can wipe out your entire investment if it doesn't. As long as you bear this in mind and invest accordingly, spread betting is not unduly risky.


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## Vodka_girl (4 Jun 2007)

Spread betting is just another form of gambling really. I wouldn't call it investing as you do not acrue any assets. It's a bit like betting on black or red on a french roulette wheel.


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## CCOVICH (4 Jun 2007)

luckystrike said:


> have you checked http://www.financial-spread-betting.com/ ?




Given your only posts to date have been to recommend this site, I strongly suspect you have some connection with them.

Please read our Posting Guidelines.


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## gonk (4 Jun 2007)

Vodka_girl said:


> Spread betting is just another form of gambling really. I wouldn't call it investing as you do not acrue any assets. It's a bit like betting on black or red on a french roulette wheel.


 
Well, of course it's gambling. That's one of its main advantages compared to other methods of investment, as any gains are tax-free.

The point remains though, that whatever way you invest, you take a risk. If you buy shares in a firm and the share price falls, you lose money just as surely as if you had taken a spread bet on the price rising. And if your spreadbet wins, you do accrue an asset - cash. To a lot of people, that's a more desirable asset than shares in a company which in the last analysis are only of value for the cash they can be sold for. You can't eat share certificates and you can't use them to pay your bill at Tesco . . .


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## Vodka_girl (4 Jun 2007)

With spread betting it is a risk! all or nothing. Shares are not. They may go up or down but rarely totally wipe out.


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## gonk (5 Jun 2007)

Vodka_girl said:


> With spread betting it is a risk!


 
For the third time, all investments involve risk.



Vodka_girl said:


> all or nothing.


 
This is a misconception. It is certainly true that it is possible to take seriously high risk positions using spread betting, but it is neither necessary to do so nor is this unique to spread betting. You can, for example, take a high-risk leveraged position in shares by buying on margin.

Mark Shipman who was on the Late Late Show a couple of weeks ago plugging his book and who attracted generally favourable comment on this forum (http://www.askaboutmoney.com/showthread.php?t=52942) makes all his investments as spread bets.



Vodka_girl said:


> Shares are not. They may go up or down but rarely totally wipe out.


 
Companies wipe out all the time. How about Baltimore which was a FTSE 100 company and then lost 99% of its share price in two years? Or Elan? Still in business, but went from €73 at its peak to about €2, and is still, six years later, only one fifth of its highest price.

There are plenty of ways of losing money besides spread betting. It does not have to be particularly risky if you are prudent.


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## demoivre (5 Jun 2007)

gonk said:


> but can wipe out your entire investment if it doesn't.



..and often more along with it because you will be responsible for the total value of your open position. Anyone contemplating spread betting should know inside out what they are getting in to - read the terms and conditions. Some spread bet firms will not guarantee stop losses so if , for example , the market gaps overnight you could end up losing a lot more than your deposit.


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## gonk (5 Jun 2007)

demoivre said:


> Some spread bet firms will not guarantee stop losses so if , for example , the market gaps overnight you could end up losing a lot more than your deposit.


 
Once again, this is not a risk that is unique to spread betting. And some spread bet firms do provide guaranteed stops in return for a very moderate increase in spread levels, so you always know that your maximum loss is limited to your deposit. Not many other investments are even capable of providing similar guarantees.

Compare two investors in the FTSE 100. One is in an index tracking fund and the other has a spread bet, with a guaranteed stop set at, say, 5% below the index's current level. Overnight, news of major conflict in the Middle East causes the FTSE to open 10% down. The spreadbetter's guaranteed stop kicks in at his 5% level and automatically closes his position. The fund investor is down 10%. Which of these investments is riskier?



demoivre said:


> Anyone contemplating spread betting should know inside out what they are getting in to.


 
I would have thought this was a given for any investment more complex than a deposit account.

The point I'm making and which I stand over 100% is that spread betting is not inherently any more risky than many other kinds of investment - including the above example of a unit-linked fund. It is possible to spread bet in ways which are very risky - but you don't have to.


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## CCOVICH (5 Jun 2007)

gonk said:
			
		

> The fund investor is down 10%. Which of these investments is riskier?


 
Surely that depends on your timeframe-there is every chance that the fund will recover any temporary/unrealised losses, whereas a spread bet 'investor' will have realised a loss.

In general, isn't it fair to say that a short-term equity investment/punt is riskier than a long-term investment?

If you were to compare spread betting to day trading, then I would agree that the risks are reasonably similar.


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## gonk (5 Jun 2007)

CCOVICH said:


> Surely that depends on your timeframe-there is every chance that the fund will recover any temporary/unrealised losses, whereas a spread bet 'investor' will have realised a loss.


 
It is mostly true that long-term buy and hold investors in equities do alright, but it's not certain by any means. Suppose our hypothetical index fund investor had instead been unfortunate enough to go into the Nikkei 225 at its 1990 peak. 17 years later, his investment would still only be worth 47% of its original value - without taking inflation into account . . . 

You can't assume that if you hold on long enough you'll make money and anyway if you want to do that as a spread bet, you can - just don't set any stops. You could, for example, buy the FTSE 100 at a Euro a point, incurring a deposit of about €6,650 at current levels. The max you can lose is the €6,650, but only if the FTSE falls to zero. Probably not a very good use of spread betting though and not one I'd recommend.

Going back to the example of the index fund versus spread bet, let's say you have €10,000 you want to invest tracking a major index like the FTSE. You might buy €10k worth of units in a tracker fund or an ETF. Alternatively, you might decide to open a spread bet with a guaranteed stop at 90% of the current index level, incurring a deposit of €1k. You could then put the other €9k on deposit earning 4% or so interest.

Leaving aside the cost of the spreads and the fund management charges, you have the same effective exposure to the index and will gain (or lose) the same amount. With the spread bet though, gains are tax-free, compared to 23% on the tracker fund and your losses are guaranteed to be no more than €1k, as opposed to no guarantee at all with the fund. This seems like a perfectly sensible use of spread betting to me. It's tax-efficient and lower risk than the tracker fund equivalent. On the other hand, I would certainly not suggest anyone gear themselves to the hilt as you can also do via spread betting.



CCOVICH said:


> In general, isn't it fair to say that a short-term equity investment/punt is riskier than a long-term investment?.


 
Yes, but it's perfectly possible to take long-term positions using spread bets over periods of months or years. That's what I do. I'm long on the FTSE 100 and Nikkei 225 and intend to hold those positions open for the foreseeable future.



CCOVICH said:


> If you were to compare spread betting to day trading, then I would agree that the risks are reasonably similar.


 
Once again, you can day trade in lots of ways including via spread bets. I would have absolutely no interest in intra-day trading or things like binary bets on whether the S&P 500 will finish up or down on the day. Doesn't mean all spread bets have to be like this. I'd refer you again to Mark Shipman, mentioned above. He's someone who it is generally agreed on this forum knows what he'd talking about and he makes all his investments as spread bets. Spread betting can be a useful - and low risk - tool in any investor's toolkit. It's all down to how you use it.


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## el diablo (28 Jul 2007)

I'm also looking this spread betting and doing some research. Paddy Power have opened their own spread betting site and give a demo account with €10,000 "play" money.


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