Wednesday, 20 June 2012

Spread betting investors stand to profit from market volatility

Finspreads, a leader in online
 financial spread betting. 
Spread betting investors could stand to profit because of market volatility driven by the unexpected fall in UK inflation figures.

That's the view of leading online financial spread betting firm Finspreads, which offers access to thousands of instruments on the world's financial markets.

The inflation figure fall of 2.8% announced yesterday saw the FTSE 100 respond with a rise of 1.7% on the day as the markets seemingly forgot the woes of the Eurozone crisis - at least for the moment.

With the FTSE 100 closing at a one-month high of 5589.16, May's drop in inflation, inching closer towards the government's 2% target, fuelled speculation of another QE announcement by the Bank of England as early as next month to help jumpstart the stalled UK economy.

The fall in the CPI figure comes on the back of a fall to 3% in April, caused, in part, by lower fuel, energy and food prices and the diminishing impact of the VAT rise last year.

Tuesday's inflation data offers spread betting investors a chance to profit from the sudden jump on the FTSE 100, says Finspreads, enabling them to profit irrespective of whether the index climbs higher, or falls lower in the coming days.

With spread betting, investors can profit not just when markets are rising, but when prices are on the decline as well.

This means, says the firm,  that as an investor, if you believe that the current upswing in the FTSE 100 is short-lived and that the markets will tumble lower in the days to come on account of the Eurozone crisis, you can take a short position on the FTSE 100. If you were right and the FTSE moves in the direction you had expected, you stand to make a profit; else you make a loss.

Similarly, if you expect that the stimulus package will have the desired impact on the UK economy, jolting it out of the recession, you could go long (or buy) on the FTSE 100 index. You would then make a profit for every point that the index moves in the direction you had indicated. Else you would make a loss.

A spokesman for Finspreads said, "Spread betting is a tax-free alternative to conventional trading and presents an excellent way of taking a position during volatile markets conditions, such as the present."

However, the spokesman warned, "Spread betting is a leveraged product which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

"Spread betting is exempt from UK stamp duty and Capital Gains Tax (CGT). However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary."

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