As the value of financial markets continues to fall, so investors are less inclined to trade — or so one would think. But there is one form of investment that in the last year has seen the number of participants treble and the number of trades increase seven-fold.

What is this trading phenomenon? The answer is financial spread-betting. Put simply, spread-betting gives an investor the opportunity to back their financial judgment on almost any dollarmarket, over a set period of time. The investor decides whether to ‘buy’ or ‘sell’ the prediction of a future outcome and select a stake. When the result of the trade is known, for every point by which the investor turns out to be right, they win a multiple of the stake they chose. Conversely, for every point that turns out to be wrong, they lose a multiple of their stake. So for example, Marks & Spencer’s share price is trading today at £3.20 and Financial Spreads, the leading spread-betting company, predicts that at the end of December the share price will be trading between 321p and 324p. An investor then has the option either to:

— sell at the lower end of the spread (321p), if he believes that the share price will fall, or
— buy at the higher figure (324p), if thinking the share price will rise.

If the investor had thought that the share price would fall and staked £50 for every penny the share price moved, then were the M&S share price to drop to an expiry price of 306p a profit of £750 would be made (321p-306p x £50). Conversely, were the share price to rise to 331p at expiry then a loss of £500 would have been accrued (331–321 x £50). This form of investment has been in existence for over 25 years, yet it is only recently that private investors have started to fully understand, and subsequently make use of, the advantages that a spread-betting account has to offer.


Probably the most attractive of these are that setting up an account is free, there are no dealing costs to pay, and under the current UK legislation all profits are exempt of capital gains and other taxes. From a trading point of view a client can choose from a vast array of markets, to buy or sell the underlying price movements. Recently, as the markets have continued to fall so the facility to oppose or short a market has proved particularly useful. The most frequently traded markets are:

— stock indices: FTSE, Wall Street, CAC, DAX, NASDAQ, Hang Seng & Nikkei and any other of the world’s major stock indices;
— individual share futures: any company in the FTSE 350, the EURO TOXX 50, and over 500 US companies;
— currencies and commodities: all the world’s major currencies and their cross-rates, as well as a full range of metals, oils and agricultural produce.