The financial markets have been around for a long time now, and there are multiple ways to make money that can suit all kinds of people. While day trading is one of the most popular, spread betting has gained tons of attention lately in countries like UK and Ireland. Spread betting is not as difficult as it sounds, and we’ll break it down for you very simply. So keep reading if you want to learn what is online spread betting and how it works.

Spread betting exist for a long time ago, IG claims the invention of spread betting in 1974, but there’s a lot of fuss around it. That’s why I’m going to clear the doubts that can pop into your head.

Nowadays you can find a huge amount of platforms and companies for spread betting, some of the most popular are: IG, oanda fx, FxPro, FXCM, CMC Markets. Currently, legal in UK and regulated by FCA.

What is online spread betting?

Online spread betting is the type of bet you make on a financial market without taking ownership of the underlying asset, that’s called spread betting. It’s a popular derivative product, which means you’re using it to speculate on whether prices will go up or down in the future. Markets such as forex and indices are often used for this, but any commodity or share price can be used.

Basically, you have to predict whether the price of an asset will rise or fall in a certain period of time. It can be used for any type of asset, but it’s most popular with forex, stocks, and indices.

Online spread betting comes with its own set of risk, so, you should be careful.

How does spread betting work?

This betting method of spread betting works by tracking the value of assets so that you have the opportunity to take a position in the market, without actually owning them. You will be profiting from the spread of your enter and exit target.

If you’re familiar with trading, you must already know what is going short or going long, in spread betting both terms apply too.

For example

Let’s say you want to place a bet on the price of Silver because you think it will decrease over a certain time period. So, you place a spread bet to ‘sell’ (short) the underlying market. If you guessed correctly and the market declines, your pop will make a profit. So, in the case you guessed incorrectly, and Silver prices increased instead, your position would lose money, but if in fact the price decline, that will be your profit.

The contrary would happen if you actually placed a spread bet to ‘buy’ (long) Silver, in this case if the price of the underlying market goes up, you will be taking profits.

Your gains or losses would vary depending on the accuracy of your price prediction.

Is online spread betting tax-free?

Yes, online spread betting is tax-free, since you won’t be taking ownership of an actual asset you won’t need to pay taxes for it.

Also, most of the time online spread betting is leveraged, this means you can enter with a small deposit and use the leverage to get full market exposition to open a larger position. But of course, this means taking more losses or profits that can outweigh your first deposit

Conclusion

If you’re looking to make money in the financial markets, spread betting may be for you. A regulated, legal type of bet that’s levered and has a high opportunity to bring high income and profits. Of course, you should know and consider that spread betting is risky, and you can lose money, remember to only use the money you are willing to lose!