Oddly, spread betting was ‘invented’ by an American mathematician but the United States isn’t taking advantage of this fun and exciting way to invest in derivatives. Since UK investors are actually making money wagering on the rise and fall of markets and commodities, it’s a wonder why this method of leveraging hasn’t hit the US full-force. Here are some facts that may interest investors on both sides of the Atlantic in terms of how spread betting works and the potential to get your feet wet without a huge amount of capital to invest.
Getting Started with Minimal Capital Outlay
One of the key benefits of spread betting is that you never need to use a huge amount of money because you never really buy anything, you never really own anything. You are not buying stocks as in the stock market, you aren’t buying gold, silver or other precious metals that are traded daily on the market. Instead, you are betting on whether or not you feel those stocks or commodities will rise or fall in value. You go long or short, just like in the derivatives market and if you are savvy with a penchant for accurate market forecasting, you really can make a good bit of money using this ability. In other words, you only need a very small minimal investment to get started.
How Some UK Investors ‘Play’ Their Bets
Knowing that there is a bit of risk involved, many UK investors start out with a set amount of money and never invest more than that amount. For example, they start with £1,000 and with an accurate forecast on the price of oil, they earn from their spread £10,000, minus brokerage and assorted fees and commissions where applicable. They take that £1,000 and reinvest, keeping back the profit. Why do they do this? Most often because there is always the chance that they could lose more than the amount they wagered. Just as they could ‘win’ that additional £9,000 it is possible that if the movement goes contrary to what they predicted they could lose that amount. It is always safe, in their eyes, to keep a safety net in reserve for those eventualities.
Where to Place Your Bets
Depending on the type of derivative you intend to bet on, you will want to find a spread betting broker that is knowledgeable in that portion of the market. Not all brokers carry all financial products, so you need to read as many spread betting broker reviews as possible to find the right broker who you can trust. One place to start is with a broker comparison site like Reviews.Spreadbetting that lists a large number of spread betting brokers to choose between. These review sites will also list what types of derivatives each broker handles and some will even list their track record. Without this information you could be choosing the wrong broker and that is something you never want to do.
What can the US learn from this? Since investors already heavily invest in derivatives and futures, why not utilise a formula created by a US mathematician that is proven to be exciting and rewarding in the UK? If there were broker review and comparison sites to give investors the information they need to make well informed choices, many more people would be able to enter the market. As it stands, too many people just don’t have the opportunity because of financial restrictions but spread betting would enable them to finally invest in a market they understand. Running parallel to futures, it is simply illogical why the US isn’t spread betting with the rest of the developed world.