Advantages of financial betting

There are several reasons why traders and investors incorporate financial betting in their armoury when it comes to generating a return from investments. Whilst clearly not without risk, there are advantages to financial betting over and above those of holding the underlying asset.

You can make money if the stock goes down as well as up, meaning there are more opportunities to make a profitable trade. It offers the possibility of profit in a bear market.

The opportunity to make returns extends beyond simply whether a share price goes up or down and there is an ever growing number of bets available. These include a double touch, whereby a share price has to hit a predetermined high and low from its current position, and a no touch, where the share won’t hit the price selected.

Bets are not restricted to shares. Indeed betting on individual shares makes up only a small proportion of betting possibilities that include share indices, foreign exchanges and commodities.

This isn’t limited to the UK but extends to other major indices and markets, offering global exposure, not to mention round the clock trading. Remember, when one market closes, another one opens!

The returns on offer for bets, in percentage terms, can be much higher than those from trading the share. A share might go up 10%, whilst the bet gives a 40% return. Of course if the bet fails then the stake is lost, unlike a share where it’s unlikely the share will lose all value.

Transactional costs are lower. Share trading incurs a transactional cost, and although they’ve come down in recent years are still around £10 per trade when using an online stock broking account.

Share purchases also incur stamp duty, currently at a rate of 0.5% of the purchase cost. Depending on whether the stocks are held in a tax-efficient vehicle such as an ISA or a pension, the shares may also give rise to a capital gains tax charge.

Financial betting doesn’t incur such charges and the returns are tax-free. Instead the betting company makes its money through the spread that is quoted for the trade.

The benefits are there to be seen but, as with all betting, only stake what you can afford to lose and remember financial betting isn’t for the feint hearted!