Spread betting definition

Financial spread betting is a type of derivative product that allows you to trade on the price movements of the financial markets, rises or falls. It has become increasingly popular in recent years.

Spread betting gives you the flexibility to speculate on whether you think the market will rise or fall. If you think the market will rise you can “buy” and if you think a market will fall, you can “sell”, allowing you to profit in both directions. Of course, if you’re incorrect, then you will incur a loss which could exceed your initial deposit.

Examples

Current GBPUSD price 1.60000-1.60020

You believe that the price of the pound against the US dollar will go up, so you buy GBP1 per point at the current price of 1.60020.

If the price moves higher by five points to 1.60070 and you were to close your trade at this price, you would make a GBP5 profit (a five-point movement at GBP1 per point).

However, if the price were to go down by five points to 1.59970 and you were to close your trade at this price, you would lose GBP5 (a five-point movement at GBP1 per point).