We can say that there are several types based on financial market instruments bets which allow cover a wide range of markets (some brokers and specialized brokers in the market betting offer literally thousands of financial instruments as underlying). These guys have fundamental in terms of execution, profit levels and levels of risk differences, but all are based on the principle of betting on the behavior of the price of a specific financial instrument. Among the main types of bets based on the market we can highlight the following:
- Financial Spread Betting (are LBO)
- The Financial Betting Simple (can be considered a type of binary option .)
What is spread betting?
We can define the spread betting as any of the various types of bets based on the outcome of an event where payment is based on the accuracy of the setting rather than a simple result of "win or lose" as is the case betting fixed (or money-line) betting odds or pari - mutuel. In this section, we will focus specifically on the financial spread betting, ie based on regarding financial markets such as Forex events.
In this case, the spread (not to be confused with the spread of Forex ) is defined as a range of possible outcomes, and the bet itself, is whether the outcome of the event will be above or below the spread . The spread betting has become particularly popular in countries like the UK in recent years, so the amount of gamblers and speculators grows daily. This popularity is due in large medidad the earnings potential spread betting, which far exceeds the amount of money that is wagered. However, while the potential loss is also high, so the punter can lose a lot of money if you are not careful. In fact, in the UK this activity is regulated by the FCA (Financial Conduct Autorithy) , instead of the Gambling Commission. FCA regulates the financial activity of the country.
The Financial Spread Betting is an increasingly popular option for speculation in financial markets and indeed has an operational rather similar to that of some financial derivatives. For example, Contracts For Difference (CFD) , in many respects quite similar in the way theyoperate to spread betting. For this reason, many companies specializing in trading financial derivatives offer their customers the ability to speculate in the market with both CFDs and through financial spread betting operations by the same trading platform. In these cases, both types of instruments used in virtually financial speculation same assets as underlying.
Advantages of spread betting
The main operational advantages of spread betting are as follows:
- A high level of leverage which means that there is potential to earn higher profits.
- Earnings are tax free.
- Betting (not just the bookmakers offer spread betting, in fact some brokers that operate directly in the financial markets do) that offer spread betting work 24 hours a day, 7 days a week.
- You can use stop loss orders and in some cases, companies allow the use of a guaranteed price execution.
- There is no charge commissions for transactions, the trader must pay only the clevis (the spread, which becomes the difference between the purchase price and the selling price).
- The financial spread trading offers a variety of instruments on which we can bet as currencies, stock indices, equities, commodities, interest rates and others.
- We are able to hedge our bets portfolio.
- There is the possibility of arbitrage between different bookmakers allowing us to safely make profits even with gambling.
- The spread betting lets you open long and short positions very easily in any of the many instruments available.
Thus, the spread betting offers quite suitable trading conditions, which makes it an almost ideal market for the trader, but like everything else, has its negative aspects.
To understand how financial spread betting works, we will explain in detail the three forms of spread betting that currently exist, which have a similar operating with each other.
Disadvantages of spread betting
Of course not all advantages with respect to spread betting, there are some negative aspects to which the operator must be careful to keep your money safer.
- Most bookmakers are offering Spread Betting UK and regulated by the FCA, which assures the operator greater security for their money and legal practices. However there are some houses that do not have regulations, so we avoid if we want to avoid being at the mercy of any company with fraudulent practices. In addition, if we are ripped off by a house regulated by the FCA we can claim to present our case and receive compensation of 48 000 pounds.
- Binary Betting bets are not regulated by the FCA, so operator has no right to make the slightest claim if the bookmaker does something wrong. In short, if we open an account for making bets Binary Betting we will be at the mercy of the house, so you'd better choose a reputable.
- Betting determine the forks (in some cases large) and prices for betting at all times. For this reason we not always have at our disposal information that fits reality. In most cases, the operator has no transparent information on market depth including operations carried out.
- Some of these bookmakers have been accused of price gouging, close the account bettors who got steady gains, prevent the execution of an order and delayed the transfer of money, especially if a significant amount of money. Logically you can not generalize and isolated cases.
Spread Betting tradicional
In this case we will give an example to understand how a traditional spread betting bet. Suppose we want to make a bet on the S & P 500 and believe that over the coming sessions will go up. For that, the day we will make the bet look quotes S & P 500 and we are at 1300 points. So we decided to make a bet by buying $ 10 per point at 1300.
Now, assuming that we were right in our forecast and indeed the S & P 500 rose about 100 points being the price at 1400 points, we entered the house account that bet and close the position in order to make profits for which we sell to 1400. this Maner, a difference between the purchase price and the selling price of 100 points the gains obtained would be 100 points x $ 10 / point = 1000 USD, which as already mentioned would be tax free.
Unlike financial derivatives such as options or futures , it does not require any collateral, only the money that allows face the possible losses that can take bets. While in the above example we use a value of $ 10 per point, the value can be set directly by the trader, which decides how much you want this way risk in the operation.
Betting on the spread betting have a limited period of time, which can be daily or quarterly for example. Upon reaching the deadline the bet is finally liquidated by which it is stated that the spread betting bets are similar to options in the way they operate.
El financial betting
The term financial betting refers to betting behavior - based and outcome of the price of a financial instrument on the market at some future time from the current price of the instrument, against the odds offered by a bookmaker or broker . In other words, it is betting based on the prices of different assets offered by the financial markets. The maximum potential payment of the bet is known in advance when the bet is taken while the maximum potential loss is also known in advance and is limited to the initial bet.
Thus, we can say that financial betting instruments are a kind of digital option . This is because the outcome of the bet when the period ends thereof (settlement) is binary, that is, win or lose. The settlement is executed in cash rather than delivery of the underlying asset is. At any point in time prior tothe time of settlement, it is common bets can be sold, allowing the possibility of betting with respect to the accuracy of a movement on the market within fixed limits of zero gain (loss the bet) and the maximum potential gain. A fee may be charged for this service sometimes.
The main difference between financial betting and speculation in financial markets through products such as financial spread betting is that the bet must offer a simple binary result of win or loss based on a related event directly with the price of a financial instrument ( in this case the trader is betting that the price of an instrument goes up or down). Thanks to this feature, the operations of financial betting offer a fixed payment level also fixed losses unlike the operations of financial spread betting, in which payment and loss vary directly with the level of prices of the underlying asset may be greater than the amount initially invested.
The main types of financial betting are as follows:
Fixed-odds betting (Fixed Odds betting)
This type of bet is quite similar to traditional betting since the maximum loss is limited to the amount wagered and the gain is obtained if the incident which occurs predicted. Also the payment is determined according to the probability of that event occurring.
To understand the concept, suppose we consider that the Dow Jones will close above 12100 at the end of a specific period of time. Meanwhile the bookmaker through a computer program determines the cost of the bet and show us so we decide we want to make the bet or not. As in any other bet, the less likely to occur have the predicted event, the higher the payment bookmaker offers relative to the cost of the bet that we make. For events that are safe, no payment so you can not bet on it is not offered.
Fixed Odds betting we can find many types or options whose difference is mainly based on events that can be expected. These types of Fixed Odds are:
- Bull Bet : This bet type is if the price of an asset will finish above a certain value at the end of the day.
- Bear Bet: In this case, bet bet if the asset price will end up below a certain value at theend of the day.
- One Touch Bet: The bet is whether the asset price will touch a certain price level before the end of the period bet.
- No Touch Bet : Unlike Bet One Touch bets, the bet is that the price of an asset will not touch a specific price level before the end of the period of the bet.
- Expiry Range Bet: Basically bet that the price of an asset will stay within a certain price range during the duration of the bet.
- Barrier Range Bet : The operator is betting that the asset price will not touch a certain price range or upward or downward before the end of the period of the bet is usually 1 week.
- Double Touch Bet: Through this option the bettor determines whether the asset price will touch both the upper and lower level of a price range before the end of the period of the bet, which usually is 1 month.
- Up or Down Bet: Unlike the Double Touch Bet, you bet that the price will touch the lower or upper range level before the end of the period of the bet.
- Double Up Bet: This bet pays twice the amount wagered if the market at the end of the closing session above a set price.
- Double Down Bet: This bet pays twice the amount wagered if the market at the end of the closing session down a set price.
The Fixed Odds betting offers very broad possibilities for operators. Its operation is very similar to the types of binary options (options all or nothing options one touch, options do not touch, etc), so any operator familiar with this type of options can easily learn to place bets based on Fixed Odds. In this case, it should be mentioned that the operator must pay a small commission on each bet the house that is operating.
El Binary Betting
The Binary Betting is a mixture of the above two types of spread betting. First, place the bookmaker shows prices of supply and demand in real time to the bet and secondly, the prices that are quoted do not correspond to the value of the financial instrument, but the odds of an event occurring related to an instrument specific, so they are always numbers ranging from 0 (impossible to occur event) to 100 (positive development).
To understand how this type of bet, suppose we want to bet that the IBEX 35 index end upward at the end of the trading session.
Now suppose that the bookmaker tells us that contributions to this event are 75-79, meaning that the house is quite certain that the IBEX 35 will go up. According to these quotes, if we had wanted to bet on the contrary that the IBEX 35 goes down, the house had given us the reverse fork, to give a quote of 21-25. Should agree with the quote, we bought the bet and indicate the amount of money per point we want to bet. In this case, let's say we bet USD 10 for buying point 79.
If the incident is confirmed, ie that indeed the IBEX ended upward at the close of the trading session, then the bets we buy beats with a value of 100. Then the gain would be 10 USD / dot x 25 = 250 USD.
Conversely, if the IBEX had ended down our bet would have won with value 0, with which had we had a pérdidad of 10 USD / dot x 75 = 750 USD.
Usually in binary betting, bookmakers do not allow use limit orders and stop orders as these significantly limit their profits, so it is important to carefully consider the contributions and the amount you want to bet on point before make the bet because as seen in the example above losses can be significant.