In particular, the UK 100 shares those constituents of the UK 100 the total spread is not 0.1%. That means that the spread either side is 0.05%, so low spreads and low margins.
The other benefits of Spread betting, of course, are that you can speculate on the downside, so you can sell something that you think is overvalued. That’s called “going short.” Because we’re dealing with a derivative, you don’t actually own the physical underlying asset at all. So, of course, you can’t if you buy Vodafone in the spread bet, you’re not a direct shareholder of Vodafone. You can’t go to the ATM for example, but you can speculate on the downside by selling it, going short, if you think the market will decline. Then, of course, later you would buy back, hopefully for a profit.
It is also an alternative to traditional stock broking, and we’ll have a little look at how that is the case.
