Try FTSE Spread Betting

Posted on August 31, 2010
Filed Under Investments | Leave a Comment

Over the recent weeks we have seen volatility return to the stock markets. Yet again the FTSE has fallen below the 5000 mark and has recovered slightly. I know a lot of investors who buy and hold shares for a long time and this time is extremely frustrating for them.

So what are you to do if you are a buy and hold investor? I have heard repeatedly that the buy and hold strategy is dead. I don’t believe that is the case but I do believe that you should be looking for other opportunities. There is an opportunity open to you to do some short term trading through FTSE spread betting.

Let me explain a little about FTSE spread betting. It is a method of taking a position in the FTSE 100 without owning the actual shares. You make your profits or losses based upon the whole market movement. You place a stake on that movement and you either win or lose depending on how the market moves.

So what are the advantages of FTSE spread betting? Well it gives you an opportunity to go both long and short. If you are confident that the FTSE 100 is about to rise then you take a long position. If you feel that it is about to fall then you go short. You can even keep you individual long positions but got short on the FTSE as a way of hedging these positions.

A further advantage of FTSE spread betting is that you don’t have to pay tax in the UK. You don’t have any commission charges as the broker makes their money by the spread of the trade. All this means that it is cheaper than trading traditional stocks and shares.

The final thing I will cover can be seen as both an advantage and a disadvantage…you trade on a margin. This means you are trading with leverage. This is great when you are making profits but can be devastating when you make losses.

Hopefully you should’ve seen that FTSE spread betting could offer some great alternatives to other investments. Make sure you are confident in knowing the risks before you start.

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