We live in an unusual economic era. If you live in the United States, you are probably aware that the stock market has broken every record during the past few weeks. Since the beginning of the business-friendly Trump administration, investors have been bullish about the prospects of the global economy, current and future. Despite this, many people have inadequate employment.
Without sufficient income, it’s impossible to invest to take advantage of this market climate. At least, that’s what most people would tell you. Fortunately, there’s an investment alternative for people who don’t make six or seven figures: spread betting.
Most people who read about personal finance on the internet have heard of it, but they might be wondering “What is Spread Betting?” As a concept, it is actually very easy to understand, but it’s not as simple as buying a stock and waiting for it to (hopefully) gain value. It thus requires a little explanation.
What is Spread Betting?
Spread betting is a form of derivatives trading. Derivatives are securities whose values are based upon underlying assets. Notice the word “based”; with this sort of financial speculation there is no actual ownership of assets. However, this does not mean that it is not potentially very profitable. You just generate income through different means than in the normal stock market.
Spread betting creates derivative trading opportunities based on many different assets and markets. You can make spread bets on bonds, stocks, Forex, stock market indices, commodities, and more (depending on where you do it). As stated above, with spread betting, you don’t actually own any of the assets in question. You simply make value judgments about the way these assets’ values will change over time.
A new user will deposit money into his or her account. This money can then be contracted to a specific asset, market, or other security. The user then chooses a time period, which can often range from seconds to weeks. The user predicts whether the price will have risen or declined at the end of that time period, then waits.
When the contract’s time expires, the price in question will have either risen or fallen. Two prices above and below the price that was current at the time the contract was made (“Bid” and “Ask” prices) make the thresholds that the price will have had to pass in order for the spread better to acquire earnings.
If the spread better predicted that the price would have risen above the upper threshold, and this actually happens (or vice versa with regard to the lower threshold), then earnings are generated in proportion to how far the price went beyond the threshold.
Spread Betting for Investment Income
All this might sound complicated, but it’s really not. Once you get started, it all seems very natural. The more important point is that this is a great way for normal people to earn extra money or become new investors.
When someone wants to invest in stocks, they have to spend a lot of money. A single share of Apple will cost $130 at the time of this writing. Spread betters can take that same $130 and initiate multiple trades, each with the possibility of earning many times the amount invested.
With practice, you’ll start to learn the insights necessary to make educated guesses about the future value of various assets. You’ll get to know certain companies and commodities intimately, learning the various international factors that create their value fluctuations.
With experience, you’ll be able to generate real money, often a full second income. Spread betting is an incredible introduction to investment, both for its low barrier to entry and for the experience it yields which is useful for all forms of investment. Many brokers offer free accounts to test your skill. Why not give it a try?