Mick Lim
by on January 30, 2020

If there is one thing that irks all of us, it is the burden of taxes. Unfortunately, there is not much we can do to get away from it. But if you are allowed to get away without paying any taxes on profits you make, then I am sure, all of us would jump at the opportunity.

One such opportunity is that of financial spread betting - read more. It allows you to go home with your profits intact since the government does not consider spread betting to be trading in the true sense of the term and deem it as pure speculation. While that is good news, it needs to be remembered that this particular instrument is quiet a risky business and should not be attempted by those who cannot take sudden losses while trading. Often times it is unnerving enough even to seasoned and sophisticated investors who would like to indulge in some trading once a while mainly because of its tremendous ability to thrill you as well as plunge you into despair almost immediately.

If however, you are aware of the nuances of financial spread betting and can spare hard cash, then you can take a chance in the market and spread bet on one or more indices, stocks, bonds, currency or commodities and if you happen to call right, you can make handsome gains by investing very little capital. It is this benefit of leverage in margined trading that beckons most traders and investors to try their luck at this derivative.

Unlike the cash market where you have to settle in full and you would also be taxed on any gains, here is a trading instrument that permits you to invest little and trade large quantity of a particular underlying. However just because you make some immediate gains initially should not make you over confident and you must not end up taking positions beyond your capacity. Remember that market volatility can quickly turn the tide and put you into deep loss as well.

Financial spread betting or margined trading is mutually beneficial to the trader and to the broker. The fees for the broker are in the spread. There is no need to pay any CGT, trading commissions or stamp duty for the trader and this encourages many traders to take larger positions so that they can benefit even when there is a small price movement in the underlying that is as per their taken position.

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