Zero
Stamp duty – Unlike buying a normal share from a broker, you will be
exempt from paying any form of stamp duty on your trades. Stamp duty is a
fee charged for every stock purchased through a brokerage firm, it is
currently at 0.5%.
Ability
to short shares – Money can also be made by betting against the value of
underlying stocks if the movement is correctly predicted. This is very
easy to do across a wide financial instrument and using spread betting
makes it even more so.
Guaranteed
Stop Losses: Spread betting are extremely risky and you can easily be
swept away in the tide of the financial market if no care is taken to
protect your earnings. The best way to reduce this risk is with a
guaranteed stop loss, which limits how much one can loose when the market
moves against you.
After
hours trading: Another benefit of spread betting trading is the ability to
place a trade even when the market is closed. Investors who work full time
jobs, and invest after work, benefit the most from this feature.
Minimum
Margin requirement: The majority of Spread Bets are made on margin, which
means that you are only providing part of the money that you are making
the bet with. Therefore, you can make £1000 worth of Spread Bets, even if
you only have £100 to bet.
Disadvantages of Spread betting
No
voting Rights: As you know, you are allowed to cast your vote if you hold
certain amount of shares in an organization. Although spread betting
mirrors the value of the underlying assets, they do not do the same for
the shares.
High
Risks: When trading on a margin, the potential for risk is much more than
the investment that the trader is putting forward. Given that most brokers
only require 10% of the bet, there is still a possibility that you could loose
5 to 10 times you invested on the bet. Should you however go short on an
investment, the potential risk in this case would be unlimited.
