The Advantages of Financial Betting
There are several reasons why traders and investors incorporate financial betting in their armoury when it comes to generating a return from investments. Whilst clearly not without risk, there are several advantages to financial betting over and above those of investing in the underlying asset.
You can make money if the stock goes down as well as up, meaning there are more opportunities to make a profitable trade. It offers the possibility of profit in a bear market, which given the current economic climate is no bad thing. There is also the chance to make greater profits in a volatile market. If a market is experiencing two hundred point swings on a daily basis, there is some serious gains to be made.
The opportunity to make returns extends beyond simply whether a share price goes up or down and there is an ever growing number of bets available. These include a double touch, whereby a share price has to hit a predetermined high and low from its current position, and a no touch, where the share won’t hit the price selected.
Bets are not restricted to shares. Indeed betting on individual shares makes up only a small proportion of betting possibilities. Opportunities exist to trade just about almost anything, but the most popular markets currently include share indices such as the FTSE or DOW, foreign exchanges and commodities.
This isn’t limited to the UK market but extends to other major indices and markets around the world. These markets offer global exposure, not to mention round the clock trading. Remember, when one market closes, another one opens and so if you wish, you could be trading twenty four hours a day. Although a word of caution, if you have lost some money don’t keep trading to try and chase the losses. There will always be more opportunities the day after.
The returns on offer for bets, in percentage terms, can be much higher than those from trading the share. A share might go up 10%, whilst the bet gives a 40% return. Of course if the bet fails then the stake is lost, unlike a share where it’s unlikely the share will lose all its value. Because of the extra risk a potential higher return is required.
Transactional costs are lower. Share trading incurs a transactional cost, and although they’ve come down in recent years are still around £10 per trade when using an online stock broking account.
Share purchases also incur stamp duty, currently at a rate of 0.5% of the purchase cost. Depending on whether the stocks are held in a tax-efficient vehicle such as an ISA or a pension, the shares may also give rise to a capital gains tax charge.
Financial betting doesn’t incur such charges and the returns are tax-free. Instead the betting company makes its money through the spread that is quoted for the trade.
The benefits are there to be seen but, as with all betting, only stake what you can afford to lose and remember financial betting isn’t for the feint hearted!
Carl Fletcher writes for Indexed Results, the link building solutions network which includes a suite of niche directories including a Betting Directory