Spread Betting

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EvilDoctorK

Guest
So what are peoples opinions on outfits such as www.deltaindex.com and others

Negative points - you can lose a lot of money (especially if you don't put stop losses in place)

Positive Points - Leveraged investment (see negative point too!), no CGT, no Stamp

Anyone care to add anything on this .. obviously you'd be insane to consider this a core part of your investment strategy .. however as a sideline and a bit of fun ?
 
I've tried this with an English company (Finspreads) and have found it a very good form of investing.

I take the following attitude:

Normal stockbroker method
If you have 2k you want to invest in the stock market. To be diverse with it you should invest in 10 stocks - which isn't really an option! So say you invest in 4 stocks with it.

You will have buy commission of €25 for each of the 4 and sell commission of another €25 and finally 1% stamp. For your 2k to break even profit wise you have to make over €220 (11%) profit.


If you have 2k on spread betting - only ever spend 20% of it - the Initial Margin. Whether you spread it over 2 stocks 4 stocks or 10 stocks the commission is still the same as you are charged on the bid offer spread which is in the region of 1.5% Here are the maths (hopefully it will explain it better)

2,000 cash lodged with Spread betting company!

invest in 10 stocks as if you are buying €200 of each stock. You will only need a 10 - 20% Initial margin = €20 to €40.

Using €40 as the Initial margin x 10 stocks you only plug up €400 of your own money (yet you are exposed to the potential profit or loss on €2,000) The worst case scenario IF YOU ONLY PUT UP €400 OF AN INITIAL MARGIN is you loose you full 2k. Also if you buy 10 stocks its charged 1 - 1.5% commission on each stock, which is the same as being charged 1 - 1.5% on one big purchase.


People tend to get greedy with spread betting and use the full 2k as the Initial Margin - which really leaves them open to financial problems. It's a great method of investing and very safe - if you are sensible.

It promotes diversity in the amount of stocks you can buy.
Much cheaper method of trading.
No stamp or Capital gains (as it's betting).
It can be a core part of your investment strategy - if you are sensible (as I described above)
 
Why not try the Sunday Business Post Spread Betting Competition at deltaindex.com?
 
SB Post

Indeed was the Biz Post competition that put it in my head .. though have to say based on my performance up to now it's just as well it's simulated money :p
 
Re: SB Post

Hi

This is something I am trying to learn more about at the moment, I reckon with so many different spread betting companies now operating on the net, there is some money to be made.

While I like the idea of spread betting, I also like the idea of something "for nothing". Many of the spread betting companies offer a free bet or part rebate on your first deposit, making the opening of a new account each time, with a different company, more attactive imho.

Found a few on [broken link removed] for example.

Also, I think from memory that Delta are offering €100 training courses, whereby they hold small classes and teach you all you need to know about spread betting. From memory, I think they subsequently give you a €100 voucher to spend on their site. Anyone ever go on this ?

Regards


G>
Click Here For Rpoints

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Re: be careful

Take AIB. Share price is 12.70, bid/offer will be in the region of 12.60 (sell) and 12.80 (buy). If you buy at 12.80, then you have to have the share price over 12.91. New sell quote would then be 12.81. It has to rise 21 points before you start to make excl any charges or loss of interest on margin(if big).
Quotes are only short term also, now quotes will be for mid Sept and mid Dec 2004. Your trade will have to close at the latest Mid Dec this yr. A massive fall or rise in a stock at any point does not leave time for a correction.
 
Re: be careful

There is a much easier way to make money...

Invest in spread betting companies. They understand the odds - the punters have no understanding of odds and all think that they can make money.

Brendan
 
I think you may have something there. I remember sometime ago reading that that there was more return buying AIB shares than putting your money on deposit with them.

Pat
 
Interesting [broken link removed] about spread betting in today's FT.
"Are spread betters investors or gamblers? I'd say 65 per cent investors and 35 per cent gamblers," says Will Armitage, of IG Index
Click to expand...

I'd say those percentages should be reversed (at least) ;)
 
Hi All,

Firstly I should declare my interest- I work for Delta Index which is an Irish spreadbetting company that focuses solely on financial spread betting. In other words shares, currencies, indices, commodities and interest rate products but no sports.

When I see the amount of effort you guys put into analysing and unearthing competitive stockbroking charges it amazes me that you have not tuned into the world of spread betting. You get leverage, it is a fraction of the cost, there is no tax on gains and you can sell short assets you think are over valued.

However, spread betting is not for everyone. You need to understand how it works and the markets you are trading. You also need to have the cash to put at risk.

Basically, if you take short to medium term positions on stocks then you should be spread-betting. If you are long term investor then stick with the managed fund.

The big plus with spreadbetting is the leverage- but it can work for or against you. Moreover, the level of gearing varies between contracts; For example you get 5 times gearing on Bank of Ireland (a €2,000 stake will get about €10,000 exposure to BOI) but you get 50 (yes, five oh!) times gearing on Dollar/ Euro (€2,000 gets €50,000 exposure)

And just to clarify garretod’s point; Yes Delta index is running workshops over August and September. They cost €100 but if you sign-up afterwards and deposit €500 (the minimum investment) we refund your €100 and add another €100. www.deltaindex.ie for more info.

Regards

Leitmotif
 
> You get leverage, it is a fraction of the cost, there is no tax on gains and you can sell short assets you think are over valued.

Do you benefit from dividends or is spread betting like tracker bonds in that respect? What, if anything, is the underlying asset in which money is invested or is it simple a wager?

> However, spread betting is not for everyone. You need to understand how it works and the markets you are trading. You also need to have the cash to put at risk.

So presumably spread betting might be classified as having a high risk/reward profile and, as such, generally only of relevant to those who already have a portfolio well diversfied by asset class, risk/reward profile, geographic location and investment timeframe (e.g. their own house, a pension, an SSIA, perhaps some equity based investments, etc.)? Sounds to me like spread betting might be the sort of peripheral "investment" that people who have already ticked the above boxes to prudently create a well rounded portfolion might engage in as a bit of fun rather than as a core investment?

> The big plus with spreadbetting is the leverage- but it can work for or against you.

So the big plus can be a minus? :p

> Yes Delta index is running workshops over August and September.

Presumably information about the mechanics of spread betting and how to engage in it is available for free in the public domain?
 
As far as I'm aware the positions you take up on the spread betting site is matched on the relevant futures market (but ideally the spread betting company can match positions within their books).

From what I can see the biggest problem with this method of investing is peoples lack of understanding. When the example of investing in BOI states that you can buy €10,000 of the stock with a €2,000 stake - people get a rush of blood and put on as much as they have (say €10,000 - which is the same as buying €50,000). If the stock drops by 10% they loose 5,000! Suddenly its a crap system because you invested 10k and a 10% drop in the stock results in a loss of half your money!

In reality you should use it as a more efficient use of your 10k, and use it as such:

2k as your stake
2k in your account to cover big potential losses
6k on deposit at 2% = €120 per annum.
The €120 per annum would more than cover your expenses and you are being conservative with the above example. You could have some of the 6k in another stock or two.


Whereas if you go the stockbroker method - the costs are way higher (transaction charges/govt charges/possible CGT on profits) and your 10k is gone until you sell up! With spread betting you have a lot to play with!
 
...but isn't it really like trying to time the market? I know I have no crystal ball and would usually stay away from short term punts. Apart from the issue of gearing, the fact that your "investment" has to terminate on a certain date seems to eliminate the possibility of riding out the troughs and peaks of the stock market over time.

Slim 8)
 
Your on the ball slim. But, if you want, you can close the position and re-open it straight away - for a cost.

So in theory you could buy into it and sell out of a stock every three months. I think, when I did the maths on this before, it cost the same to do this for 15 months as it would to buy and sell the stock using a traditional stockbroker method. I didn't factor in the benefits of no tax or the fact you don't have to come up with all of the cash for spread betting.
 
Hello
2 Questions

What is the differnce between spread betting and CFDs?
Can one bet on smaller companies?

Thanks
 
Financial Spread Betting

CFD's and Spreadbetting are similar in that you get leverage but differ in their tax treatment.

Spread betting is tax free and does not necessitate making a tax return. CFD's, on the other hand, are taxed but can provide an interest write off against income tax which may be attractive for some investors. The tax treatment is complex and I would suggest you talk to an advisor if there are substantial sums involved.

Furthermore, CFD's have no expiry so can be held indefinitely whereas a spreadbet has usually a 3 month expiry which can then be rolled over into the next contract and so on.

There is a wider range of instruments with spread betting including currencies, commodities and indices.
 
Re: Financial Spread Betting

Spread Betting is betting i.e. gambling - pure and simple. You are taking a punt on an uncertain outcome. The prices are set so that the bookie has a built in margin. You will beat the bookie occasionally, but over the long term, you will lose money.

Share trading is also gambling. Over the long term, you will lose an amount equal to the stockbroker's commissions and stamp duties.

Buying and holding shares is investing. Over the long term, you can expect to have a positive return on a diversified basket of shares or on a low cost unit linked fund.

The tax aspects of Spread Betting are irrelevant. Over time you will lose money, so you will not pay tax. An investor in shares will pay income tax and CGT on his dividends and profits.

Again I stress, if you want to make money from spread betting, invest in the spread betting company.

Brendan
 
Financial Spread Betting

Sure Spread Betting is gambling but all investment is gambling and anyone who tells you different is selling you something- probably a manged fund.

The Irish investor has been lulled into docility by this long term investment myth. Investing blindly over the long term only works in a long term bull market.

"You are taking a punt on an uncertain outcome. The prices are set so that the bookie has a built in margin. You will beat the bookie occasionally, but over the long term, you will lose money"

This is not an accurate reflection of how Financial Spread Betting works. The Spread Betting firm is not betting against you (if it is properly run) it is laying off your bet in the futures market and charging you a spread to gain access to these institutional markets.

Financial Spread Betting is a transparent and cost effective way of trading your view of the market. It is not for everyone- you need to have a view- but if you do your research your opinion is as valid as any fund manager, stock analyst or investment advisor.
 
Hello
Is there a huge difference in terms of cust. service, spreads, charges between the different spread betting companies?
 
Qeustion said:
Can one bet on smaller companies?

Thanks
Click to expand...

Most spreadbetting companies cover the major the large caps in the major markets.Some cover the midcaps,I dont think there is any that covers the smallcaps.
 
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