![]() ![]() Most spread betting companies in the U.K. Spread betting is illegal in the United States as of this writing. When an investor buys shares in a company, they become literal part-owners of that company, and when an investor buys a commodity futures contract there can be at least a technical possibility of taking physical delivery of the commodity, though most futures are settled in cash. With financial spread betting, participants never own (and never can own) the underlying financial instrument. The bettor chooses the security in question (like an individual stock or stock index), decides on the size of the bet, puts up a small percentage of the notional trade value as collateral (margin), and then profits or loses money depending upon how the price of the underlying security moves. Spread betting is essentially speculating on the future direction of a specified financial instrument like an individual stock or index by making a directional bet with the spread betting company. Further blurring the distinction, most spread betting companies refer to themselves as “brokers”, and many of these “brokers” openly refer to a spread betting transaction as a “bet”. Simply defining spread betting can be controversial it can be defined as a derivative investment strategy, but it can also be defined as gambling. ![]() Imanolurquizu/iStock via Getty Images What Is Spread Betting?
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