Financial Spread bets are cost efficient in the sense that you can invest in a given investment without actually owning the investment. You are really betting on how much the value of the investment will change. Bets are usually so much per point and can be leveraged to a very great extent. In other words you might be betting 10 or 100p per point of change in a given investment that can change in value dramatically in either direction. You can make a great deal of money or lose a great deal of money since it is leveraged as described above. The risk is all yours and you should consider your bets very carefully before purchasing a financial spread bet.

While it is cost efficient in the sense you can make a lot of money without having to actually own the investment, the risks are great. As an investor you should also review the guidelines and rules posted on our partner web sites to ensure that you understand all of the terms and conditions with respect to financial spread betting. Examine the fee's, penalties and exposure if you should find yourself on the losing end of a financial spread bet.

A quick example will help explain financial spread betting further. Imagine a stock which is trading at 175p. You place a spread bet of 10 £'s per point and you are betting that the value of the stock will strengthen in the next few days. After one day the value of the stock has increased by 10 points to 185 and you decide to close your bet. Your stock has risen by 10 points and your bet was 10 £'s per bet, therefore your profit is 100 £'s, less any commission and finance charges that may be involved. Conversely if the stock had fallen by 10 points, and you decided to close, you could find yourself owing 100 £'s plus commission and finance charges.

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