How to Bet on Shares | Shares Betting
How does betting on Shares work?
The spread bets can easily be shorted offering total flexibility to the trader. Spread betting on individual shares works in the same way as spread market on any financial product. The spread better is offered a two-way price: the bid price and the ask price. The two-way price quotation indicates the best price at which a share can be sold and bought at a given point in a time. The bid price represents the maximum price that buyers such as you are willing to pay for a share or security. The ask price represents the minimum price that sellers, such as you are willing to receive for the share. They are also known as bid-ask or bid-offer.
A trade or transaction occurs when a seller and buyer agree on a price for the share or security. The difference between the bid and ask prices is called the spread. The spread is a key indicator of the liquidity of the asset. Bid-ask spreads can vary widely depending on the share and the market. The smaller the spread is, the better the liquidity is. For example: Vodafone is quoted at 120.5 – 121. Here the asking price is £121 and the bidding price is £120.5. If each point represents £10 and you buy at 121 and then sell out at 125, then the profit = 125 – 121 = 4 * £10 a point = £40.
Where to bet on Shares?
There are many markets to trade shares. The UK market, Wall Street (the USA market), the big European bourses, etc are the main markets for betting on shares. But markets such as Finland, Greece, Ireland, and Hong Kong are the most important markets the most spread betters offer shares on.
Types of bets on Shares
When spread betting on shares both the traditional daily Cash bet and Quarterlies are offered with most shares. Daily Bets are designed for short term trading and cheaper to trade. Daily Bets offer tighter bid-offer spreads. There will be an overnight financing charge if your position is held overnight. The Quarterlies are more suited for medium to longer term trades which last more than a week. For example, if you think the Vodafone share price will go up in the coming weeks or months, then trade the quarterly on the Vodafone shares for the next several weeks or months.
Most spread bet brokers will quote 3 separate quarterly bets when betting on shares. For example, if the trading date is now January, the relevant brokers will offer a March, June and September bet. You should tailor these quarterly bets to your own trading strategies and view. For example, if you think the Vodafone is bullish for the next month, trade the June.
Roll over when betting on Shares
Bets on shares can be rolled over. A roll over is a trading situation where a position from one month is rolled into the next. Traders keep their bets open if they feel that their shares can go higher over time in the next month or so. They need to place a rollover bet which will roll over into the next month. There is a small charge for rolling over a bet. Also, if a quarterly is not rolled over it will automatically be closed when the spread bet expires and any profit or loss will be debited from your account.
There is an incredible range of spread bets available when it comes to betting on shares. You should watch the bid-offer spreads because they can be expensive, especially when you are doing short term trading. The bid-offer spreads, however, depend on which market you are trading in and how popular the share is. Learn the basics and always take calculated risks to minimize your losses and maximize your profits.
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