Spread betting

jamesd

IgIndex says that about 85% of its customers lose money.

Spread betting has uses but extreme care and constant tracking of the nominal value of investment that your bet corresponds to so you understand your potential loss is very important. As is moderate amounts of leverage only, perhaps limiting it to three times your investable money or less.

plunt

as mentioned above i agree that if you dont know what you are doing then be extremely careful.

I for one use my spreadbetting account for various benefits

1) liquidity so i can chase bank account interest rates

2) the interest i paid on my exposure with cmc USED to be 2%+ libor and only charge you on the unfunded portion. They have now changed it to line up with the industry and charge you on the full amount and 2.5%+libor.

3) my main use is for dividends... Dividends are paid in spreadbetting accounts on the ex dividend date rather than dividend payment date giving you a month or so early access!

4) income and gains are tax free (careful as this also mean you cant offset loses)

5) with my cmc account i can trade on profits, i have therefore now been able to withdraw all my initial cash deposit and the margin is being funded with profits. Any time a dividend comes in a withdraw it

6) you can benefits from investing in foreign companys (eg: US , France etc) and still have your investment in pounds!

I have some winning bets and some losing bets but overall in profit.

A strategy i recently thought of would be to spreadbet a company which has a dividend of 4%+ but is extremely stable. this would effectively allow you to leverage dividend payments and the dividends will easily cover the financing cost

eg IPP (International public partnerships)

say you bet 1 pound per a point

at the current share price of £1.28....

Exposure: £128
Dividend yield 4.65% --> £5.952
Finance cost 3% ---> £3.84
Profit £2.112
So a return on exposure of 1.65%

BUT

you only put a deposit of ~5% so £6.40

meaning your return is actually 33% ... starts to be a nice yield...

Yes this is basic leveraging but the idea is to find the least volatile stock!