Spread the word

So what actually is spread betting? Well, to put it simply, if you went to a stockbroker to start dealing shares in a company, say BT for the sake of argument, you will be quoted two prices. The lower price (£1.00 say) is the bid price, the price you would get should you want to sell the shares. The second price, the higher price (let’s say £1.10), is the price you pay should you want to buy the shares-known as the ‘offer’ price.

The difference between the two prices is called the ‘Spread’- in this case 10p. Spread betting is where you try and bet on whether the share, index, commodity whatever it is you’re interested in will go down or up. If you think the market is going to go up (a ‘Bull market) then you buy the shares at the offer price and wait for it to go higher, then when you think you’ve made enough money you sell the shares and take the profit.

On the other hand, if you think the shares will go down you sell the commodity ‘short’ at the lower price the ‘bid’ price by borrowing the shares and then, hopefully buying them when the price has fallen. In a nutshell you hope the price of the commodity, shares or currency will fall below the price you invested making you money on the falling market.