If you are looking for an investment opportunity that has a lot of great opportunities for strong profits, but without the long term requirements of typical stock or mutual fund investing, you may be interested in financial spread betting. This type of investing uses stocks, commodities or currency exchanges as a tool that you will be wagering money on.
Similar to binary options, you will place a wager on whether the asset will go up or down in value. Unlike binary options, however, you can make or lose more money than just the initial investment and you will have more control as to when you close your bet and collect your winnings or accept your losses.
Important Parts of Financial Spread Betting
While it can seem complicated at first, it is actually a fairly simple investment strategy once you have a good understanding of it. To start, you will need to know what all of the different parts involved in the investment are. Look at each of the following points to learn about how each of them is used in this type of investment:
- Asset – The asset is not something that you are buying, but something you are betting based on. This is similar to choosing a sports game to bet on, and you are betting on the score of your chosen team.
- Price – Each asset is given a set price range that you can bet against. If you are betting on the UK 100 stock index, for example, and it currently at 5000, the price range for your bet may be 5000-5001. You will then bet that it will either go above this range, or below it.
- Per Point Wager – When you make your bet, you will wager a set dollar amount per point. If you bet that the asset will go up above the price, you will ‘win’ the amount you wager times the number of points it goes up. So if you bet $10, and you close your bet when the index price is 5010, you will make $90 (the price went up 9 points from 5001 and you bet $10 per point). If the price goes down, however, you would lose money in the same way.
- Closing the Bet – You can close the bet at any time, at which point your winnings or losses will be determined.
If you are familiar with the binary options, you can see that this is quite similar, except there is a greater option for larger wins and losses. In addition, you have added control over how long you want the investment to last.
Risk & Benefits
As with any investment opportunity, there are some significant risks as well as great benefits to this strategy. While it is not the right choice for everyone, it does provide an excellent alternative option for those who are looking for an interesting opportunity with significant potential for profit, as long as the individual making the bet has sufficient tolerance for risk.