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How do I Choose the Best Spread Betting System?

By Bobby R. Goldsmith
Updated May 17, 2024
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There are several factors that come into play for any investor when choosing the best spread betting system for their needs. With increasing volatility making more traditional forms of investment riskier, spread betting is becoming a much more popular avenue for turning a profit on the performance of certain stocks, markets, currencies or commodities on the global market. A good spread betting system needs to incorporate several elements to optimize short-term and long-term success. These include, but are not limited to, contracting with a single spread betting company, making sure that company offers a wide variety of available bets with generous spreads, and that the investor employs a full range of market analytics when configuring wagers.

Through the employment of a spread betting system, an investor can use the increasing volatility of the world's markets to his advantage. Spread betting is one of the few investment methods that allow investors to profit from both the poor performance and the excellent performance of an investment vehicle. This factor makes the use of a spread betting system viable and profitable in all economic climates. There are certain strategies available with spread betting that can help investors take advantage of the activity to maximize returns and mitigate the risk of loss. One way that is growing in popularity is the short-sell spread betting strategy.

With a short-sell spread betting system, an investor makes a profit when a stock, bond note or other investment vehicle is suffering a loss. The short-sale system is the act of betting against the positive performance of a certain position, and then making a profit on it when the stock loses within the window that the investor predicts. For example, if stock in Company X has been rising and performing unexpectedly well for a short amount of time, but the volume analysis shows that the performance is market bluster leading to an inflated performance, an investor would want to short that stock.

If an investor thinks that Company X's stock will drop 3%, and the brokerage quotes the short position at a 2% spread, any loss from that stock above 2% will net the investor a profit. It is similar to covering the spread when betting on an American football game. An bettor can wager on one team to lose and another to win, but the spread keeps things relatively even, because the bettor has to get at least the difference in the spread in order to win the bet.

Another spread betting system popular among spread betting investors is called arbitrage, which involves receiving a spread quote from two separate spread betting brokers for the same stock or investment vehicle. If, and only if, the top end of the spread for the quote provided by one is less than the bottom end of the spread quoted by the other, an investor can then place bets with both. This allows a risk-free spread bet on the performance of a particular stock.

For example, if broker A quotes a spread of 1%-3% on a loss of GM stock, and broker B quotes a more cautious spread of 1%-2%, an investor can arbitrage the spread bet and ensure that the wager at least breaks even. To do that, an investor would place a bet with broker A that the stock will rise, and a bet with broker B that the stock will fall. Whether the stock rises or falls, the investor is covered and will, depending on the exact spread, make a profit.

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