spread-betting

Why spread betting popular in UK
1) Spread betting on these markets means that any profits are tax-free
2) higher levarage ( $1500 init deposit vs. $8000 for crude contract to trade )
3) all instuments are offered in one firm forex, stocks, commodities where as with regular brokers you need to go to 2 to 3 firms

Experienced traders all spread bet for the simple reason that if they can make £10,000 from spread betting, then they can keep £10,000 spread betting, rather than handing over a significant proportion of it to the taxman.

There is no Capital Gains Tax payable on any gain from Financial Spread Betting. Consequently, losses cannot be offset against any capital gain.


There are now over 20 spread betting providers in the UK, and fierce competition has driven spreads down. A decade ago, the spread on a benchmark index such as the FTSE 100 index was around 10 points. Today it has fallen to around two. Consolidation rumours are constant, but most believe that the market is growing sufficiently to support this number of providers.

Over 400,000 people in the UK have a spread betting account, and the majority of the traders, currently, are male. Spread betters tend to be self employed individuals or those working in the IT and finance and insurance sectors. Who uses spread bets and what markets are available?


With the January Nymex crude future quoted at 48.79-48.87 at Deal4free, someone who was bearish could have sold the spread at 48.79 for say £10 per point, a position requiring a mhttp://www.blogger.com/img/blank.gif
insert bold tagsargin deposit of £1,400. The subsequent collapse in the price took the spread to 43.21-43.29 so that the bet could have been closed at 43.29 for a profit of £5,500.
asr: with $1400 you can have a position , where as for broker acct. you need init. margin of $7000

'Spread betting on these markets means that any profits are tax-free
There is greater flexibility over the size of the exposure than there
is when trading the futures contracts directly.'


Note that if you're an American you cannot participate in financial spread betting (unless you create an offshore company) because sites like Capital Spreads are highly regulated by the British Government (specifically, the FSA) which does not allow these sites to violate the U.S. laws prohibiting Americans from trading derivatives outside the U.S. Yes that's right...you're the only western industrialized nation that prohibits its supposedly 'free' citizens from speculating with your money offshore as you see fit. Call it protectionism by the CFTC, call it 'big brother,' call it whatever you like; it isn't right. If you are from the US you simply have to consider taxes as a type of 'slippage' that you as a trader in the States need to overcome with better 'edges'...
----------------

Do Spread Betting firms really hedge?

asr: it seems these firm employees have good access to customer records as they do lots of manual processing ..
so you may be able to get consistently losing customer records easily and their trades ( esp. if they are new customers and have access to real time trades )

My own personal view is that the different companies will note your trading style and that can determine what kind of service you receive. If you scalp trade effectively (scalpers attempt to 'scalp' i.e. extract profits from small price movements using large position sizes) then you will often upset the spreadbetting companies, I know companies will argue this but that is my experience and therefore my view. More than a year ago I had a dispute IG Index which is evidence of that. IG are happy to send out advertising literature stating that 'prices are always live and tradable' and that 'the price you see is the price you get' - this is in order to attract customers to their platform. However, as you become a better trader and win money in very short time-frames you may start to get treated differently

If we are honest then we know that, in this computer driven world which we now live, it is possible to execute customer's orders electronically in a fraction of a second. Ask yourself why many of these companies still route certain orders or customers through a manual dealing procedure? These companies are fully aware that an introduction of a delay gives them a chance to observe movements within the market which were subsequent to the order being placed - of course they can then use these 'subsequent movements' to determine the financial viability of the submitted order.