In the United Kingdom, a type of financial trading called “spread betting” is available to investors. Spread betting can be used as a derivatives investment that allows a trader to cash in on the price movements of many financial markets, such as indices, shares, currencies, commodities and more.
Spread bets can be used to speculate on price movements regardless of whether the general market is rising or falling. If you go long (buy), profits rise in line with any increase in that price. If you go short (sell), profits will rise in line with any fall. Similarly, if you go long on the price and the underlying stock price falls, you will lose money.
In order to participate in spread betting, you must first open a margin account with a broker such as City Index. When you place a trade, you are required to deposit a small percentage of the full value of your position. The potential for both profits and losses from an initial investment is significantly higher than in traditional trading. The required margin is typically between 1% and 10% of the total value of your position, depending on the market. City Index offers prices on over 12,000 spread betting markets.