If the worst happens and both bonus and job prove illusory, maybe spread betting could make amends.
Lots of people seem to be doing it. All the spread betting companies we’ve spoken to say they’ve received large increases in applications, even since the New Year. They put this partly down, to high volatility, which magnifies potential gains (and losses), partly to redundant bankers, and partly to people trying to top up their pay with a little market speculation.
“We have indeed seen an influx of interest from individuals in corporate trading houses and investment banks,” says Simon Brown, managing director at FuturesBetting.com. “A significant percentage of our client base are individuals who at one point in their career traded for an institution, but are now self-financed.”
Precisely how much financing you’d need to make around 60k a year (tax free) out of spread betting varies according to which markets you trade (and how profitable you are).
“Trading the FTSE index on a margin of about 5%, for instance, a trade of 10 per point (40k total exposure, requiring a deposit of about 2k), could quite feasibly make 1-2k in a day (Monday, the FTSE lost 120 points, or 1.2k on a 10/pt bet),” says Tim Hughes, head of sales trading at IG Index.
He adds: “Assuming you never lost (of course an unrealistic assumption), 50 such trades per year would yield a 60k tax free return.”
Needless to say, you can also lose a lot of money if a spread bet goes bad. The danger of blowing a paltry bonus or redundancy payment is partly mitigated by stop loss arrangements, but these can make matters worse.
For example, if you enter a long position on the FTSE at 4250, bet 10 per point and set a stop at 4,150, the index could easily fall that far, forcing you to close the trade at a loss of 1k, only to find that the market subsequently rises to 4,300.
“Volatility has often lead to clients who keep stop losses pretty close being knocked out very quickly,” says Angus Campbell, head of sales at Capital Spreads.