Education

Depending on the amount of time you

held the Toyota stock, an 8% return isn’t so bad. But let’s say you

want to be a little more venturesome, on the one hand, but yet more

conservative on the other because you don’t want all of your money

tied up in just one stock and would prefer to spread your risks over

several stocks or to keep some of it in cash in your account.

With spread betting

you can specify how much you are willing to bet on each point change

in Toyota’s share price, using the bid-ask spread to either buy or

sell, depending on your market view. You may be willing to bet only

$2 (about £1) per point, using some of your funds to bet on other

stocks or other markets. Or you may want to risk $50 (£26) or $100

(£52) per point on Toyota. You determine the size of your position

and the amount of your risk by the amount you are willing to bet.

Like futures,

spread betting is also based on margin, which means that you only

have to pay a deposit and not the full amount at the time the bet is

placed. Normally, the deposit is based on a percentage of the bet.