Share Trading
I’ve been looking at spread betting for a few weeks now to give my trading another angle, mainly to -:
- Take advantage of downward movements as well as up,
- The gearing,
- The tax advantage.
I have found over the years that all to often one can get caught trapped with a share for longer than intended due to the fact that the price has not achieved what one had wanted, and therefore gets stuck as I seem to be with a number of positions at the moment, spread betting seems to be a faster moving vehicle taking profits or cutting losses with stops at predetermined levels allowing the release of funds back to the account for further “bets”.
Let’s take a simple example of a spread betting trade, disregarding interest and any commission.
An traders notes that BP shares are presently at 450p and believes they have further to rise.
The spread bet provider’s quote is 449-451
The spread trader buys to open at 451
The trader bets £10 per point: £10
Value of investment/market exposure (£/point x share value): £4,510
Margin of 5%: £225
A week or so later BP stock have risen to 480p
The spread bet provider’s quote is now 479-481
The trader sells to close at 479
Value of investment (£/point x share price): £4,790
Trading profit (£4,790 minus £4,510): £280
Effective gain on funds deposited (£280 ÷ £225): 124%
It is worth noting that, when you short a stock, you still have to fund any dividends or coupons due during
your period of ownership, and your position will be adjusted to take account of this.
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Online spread trading makes share trading a whole lot easier. Now you don’t have to be fully invested in a share, you can place a bet on it and you’re done.
It’s almost the same as trading a share but it’s completely different. When you trade spreads online and you are placing a bet on the share you have the risk of the bet you are placing and that’s all.
Unlike real share trading where you are fully invested on a share and when your share is going down, so does your money, in spread betting, you place a bet which is the only amount of money you risk and you can bet on whether the share will go up in value or down.
Share trading has became an integral part of financial spread betting as its features are attractive for traders, especially in unstable financial times where a share value can drop and jump at the same time.