LONDON, April 30, 2012 /PRNewswire/ --
With market volatility set to increase as traders and investors position themselves for a slowdown in global growth in 2012; spread betting - as an alternative to more conventional forms of trading - could be the answer to potentially profiting from small price movements in the market - regardless of their direction.
With UK tax rates still seen as uncomfortably high, this can make spread betting even more of an attractive option for investors looking for a greater return. Why?
Because all profits gained through spread betting are - at present - exempt from Capital Gains Tax (CGT) and Stamp Duty* in the UK. However, we must recognize that this is subject to change.
How to Spread Bet
Spread betting itself is the act of taking a position on the future price movement of a particular market.
Through spread betting provider City Index; investors can benefit from 24-hour access to over 12,000 financial markets around the world. These include shares, indices and currencies; with access to 50 currency pairs including majors, minors and exotics.
The 'spread' itself describes the gap between the buy and sell price; investors believing a market's price will increase, would choose to buy and their profits would rise in line with any increase on that price. Alternatively, if they believe the market will fall; they sell and their profits would increase with any fall in price. On the other hand, if prices move against them, they would encounter a loss.
Buying or Selling in spread betting is also known as going long and going short.
The spread 'bet' is where you bet on a specific amount per point, for example - £10 per point. This means that for every point the market moves in your favour, you will net a £10 profit.
Remember, this also works the other way; if the market moves against you, you will net a £10 loss per point.
Spread Betting Example: UK 100 DFT
For example, let's look at the UK 100 DFT. Say it is trading at 5782. You take a buy position of £10 per point. In the coming days the market moves 30 points to 5812 in your favour, when you decide to cash in.
As a result, you net a tax-free* profit of £300. Why? Because the market moved 30 points in your favour, and you had bet £10 per point, i.e. (5812-5782) x £10 = £300.
However, had the market moved against your position by 30 points - you would then have lost £300.
This is why utilising risk management tools such as stop loss orders is imperative to your trading success. In the example above, had you placed your stop loss at 5772 - you'd have only had to incur a £100 loss. (5782 - 5772) x £10 = £100
Start Spread Betting with City Index
Start spread betting with City Index now and benefit from tax-efficient trading across thousands of financial markets.
Trade the opportunity as you see it with their professional range of trading platforms; including their spread betting and CFD trading application for iPhone™, Android™ and Blackberry.
The award-winning City Trading™ app enables you to access live price movements as they happen, giving you the upper-hand in the marketplace.
*UK Tax Laws are subject to change and may differ depending on your personal circumstances.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, contracts for difference (CFDs) and, in the UK, spread betting.
We constantly look to improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. Visit http://www.cityindex.co.uk/ for more information.
SOURCE City Index