Spread betting allows investors to trade on a short-term basis with long or short positions. The common benefits associated with spread betting are:
- Tax free profits as well as exemption from stamp duty
- Use of leverage requires a small percentage deposit of an investor’s overall trade position (or margin). This means that the potential for gains is amplified but losses are also dangerously amplified,
- Ability to profit in any situation by making a correct long (buy) or short (sell) position.
- Huge range of subjects to bet or trade upon – including shares, indices, currencies, bonds, commodities, interest rates and more.
However, despite the benefits, it is important to understand that spread betting is more risky than traditional investing. Losses are amplified due to margin and it would be wise to include stop losses on bets to help lower potential downside risk.