Hedging their bets

Proving there is definitely something to be said for the odd gamble, a US company, Paulson and Co, certainly hit the jackpot with their wager on the Royal Bank of Scotland this week. Having placed a bet on whether or not RBS’s shares would struggle, Paulson & Co triumphed and in turn earned £90 million ($127m) for their efforts.

The Royal Bank of Scotland’s shares had dramatically fallen in the last six months and quite shrewdly Paulson & Co predicted this was only going to get worse. Spread betting does not lend itself just to stockbrokers or companies in general. More and more ordinary investors are starting to realise that this type of gambling is paying off with as many as 150,000 participating and as it’s a gamble and not an investment, there’s no tax to pay on the profits you stand to make.

Unlike a horse race where you would bet on the horse finishing in a certain position, spread betting allows you to take a gamble on whether or not something will fall or rise, thus the bet allows you more scope on return. There are no specific limits to the amount of the wager you place.

Using a spread betting company to place your bet, you will have been given a prediction by the company as to where a share or index will be in the future, it is then up to you to decide whether this will be higher or lower in the future. It really is that simple!