The Advantages of Financial Spreadbetting

There are many potential advantages to financial spreadbetting when compared to other, traditional, types of investing in Ireland.  Did you know that you can capitalise on market movements without putting up the full value of the underlying instrument? Thousands of investors who started out trading shares are today incorporating the unique benefits of spread betting into their investment portfolio…

Here are some of the major reasons why you may wish to choose this method of investing. Do not worry if you are unfamiliar with any of the terminology here; full explanations are covered later in the ‘Guide’.

  • Income Tax-Free.

Under current U.K. taxation regulations any income derived from financial spreadbetting does not attract any Income Tax since it is income from betting which is not taxable.

  • Capital Gains Tax-Free.

Similarly, any profits made do not attract a CGT liability unlike a number of other types of investing.

  • No Commission or Stamp Duty to pay.

Readers will be familiar with paying both broker fees and Stamp Duty when buying and selling shares. Financial spreadbetting transactions do not attract Stamp Duty and all commissions/broker fees are covered in the spread whether you are buying or selling.

  • Trade on Margin i.e. you only deposit a percentage of the value of the trade.

As you’re only putting up a small percentage of the value of your position, you’re tying up far less of your capital than if you were trading shares traditionally.  Margin trading can be very rewarding. Since you need only deposit a % of the true value of the investment you are able to maximise your exposure (e.g. buy 5000 BT Shares instead of 1000) or perhaps use the additional funds to seek out further opportunities.

  • Ability to go long or short i.e. Buy in anticipation of a rise or Sell in anticipation of a fall.

As you’re not buying the physical underlying asset, it’s just as easy to back a market to fall (taking a short position) as it is to back a market to rise.  Whatever the financial instrument, Shares, Indices, Currencies, Commodities etc. you are able to buy in anticipation of a rise in price or sell in anticipation of a fall in price. You can therefore make profits in both rising and falling markets.

  • Take a short, medium or long-term view.

While the cost of investing in physical shares means it is sensible to plan your investments for months or even years, spread betting is cost effective to enter and exit and doesn’t commit you to any one position for long.

  • Guaranteed Stop Orders.

A Guaranteed Stop Order can be placed at the time of opening a position to limit any loss that may be suffered. Although there is a worthwhile fee for this service, this type of Stop Order is effective irrespective of the market. If therefore your stop order on The FTSE 100 Index was placed at 4500 and the market opened up at 4400 then your order would be executed at the GSO price of 4500.

  • Internet trading with customisable trading screens.

All spreadbetting companies allow trading via the Internet either on browser based or proprietary software. Your screen can be customised to display your ‘favourites’ from a wide variety of options.

  • Control

Financial spreadbetting allows the individual to take complete control of all aspects of trading without intervention of a dealer or broker. You will be able to:

– Set your individual market entry and exit points.
– Manage your own positions.
– Set your own Stop/Limit Levels to limit losses and lock in gains.
– View your positions and financial statements on line.

  • Immediate execution of your orders at the quoted price.

Orders are typically executed immediately, whether this is quoted by a Dealer or at the price quoted on your screen.

  • Different order types.

– There are different order types to satisfy the needs of short, medium and long-term traders. E.g. Daily. Quarterly, Annual.
– There are different order types to enable you to enter and/or exit the market when you choose. E.g. Stop, Limit.

  • Out of hours trading.

The majority of markets trade ‘Out of Hours’ therefore, for example, you can place positions on the U.K. market beyond 4.30 pm and beyond 9pm (U.K. time) in the U.S.A.

  • Trade many markets and instruments from one account.

This method of trading permits you to take positions on otherwise inaccessible markets such as whole stock indices.  Financial spreadbetting allows you to place positions in many different markets (e.g. U.K., U.S.A., Japan) and many different financial instruments (e.g. Stocks, Indices, Currencies, Commodities) from one single account.  You can also diversify your portfolio within the same account by dealing on forex, commodities, interest rates and more.  This flexibility makes administration of financial positions much simpler.

  • Complete documentation suites including:

The financial spreadbetting companies provide a complete suite of documentation to ensure you maintain a complete record and paper trail of your activity. Typically you would expect to receive the following:

– Bet confirmations
– Current positions
– Available funds
– Daily and Monthly Statements
– Recent trades

As you can see there are many advantages to using this form of trading/investing over more traditional methods. Now read on and learn more of the fascinating world of financial spreadbetting in Ireland.

IN SUMMARY: Spread betting creates additional dealing opportunities for shares traders, enabling you to profit tax-free* from the rise or fall of a wide range of markets. It also gives those with existing equity portfolios a way of hedging their physical portfolios for a fraction of the capital.