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Maybe spread betting is the answer

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.

Comments (19)

  1. ahhh spread betting…..the final step before sitting at William Hill all day trying to earn a living.

  2. Stop-loss, anyone familiar with that concept? Someone should have told Mike Ashley! A 300m loss on one HBOS spread bet before he decided enough was enough – wonder what his stop-loss was? Newcastle FC probably.

  3. All a bit sad , if people are gambling their limited payoffs. Dont be surprised to hear that the “Brokers/ Dealers” on the phone are mainly untrained to any degree about the markets and view most losing punters with disdain / amusement….And the spreads quoted are often laughable.
    But then again if you are lucky you can win large

    burntbythespread Reply
  4. Even the spread betting sites are introducing complex products that go over my head

  5. lol , as fun as spread betting is, there is absolutely no way on earth you should consider that a viable career.i agree with Ben you may aswell be down william hill with a dollar and a dream.

    the barrow boy Reply
  6. haha. Have done that! Exactly as burntbythespread said. The spread-betting traders on the phone are real ‘monkeys’ with the skill set of a tele-sales person. During increased periods of volatility like when Fed rates are announced, the computer systems even of the biggest spread-betting firms usually break down under the volume of trades. Most traders loose thousands of during these times. And of course you sign away any kind if liability bewfore they let you trade with you. Also, in general the bid/ask for any product are set by the spread betting agent without regulation. That means for overnight trades, the agent can look at their books and basically calculate how they make money when they set prices the next morning. There is no recourse and many spread-betting agents do what in the industry is called as ‘moving the goal posts’!! In spread-betting mostly ‘the house’ wins. If anyone ever won a substantial sum over a longer period of time spread-betting please call me and I will double your win!!

  7. I’d be interested to find out from which areas of I-Banking that those who have made comments on this post have come from. I would guess, probably not many from Sales and Trading, given quite a few traders who are employed still use spread trading as a supplement to their income. I personally think, that if you have been displaced in the market, and are having trouble getting back into the market, there are a lot worse things that you could be doing. Granted whilst this should never been seen as a long term career, but monitoring the Equity , Fixed Income, Currencies and Commodities markets and placing disciplined trades that are backed with a proper investment thesis and risk assessment, will actually hone your trading skills and teach you how to run a position for meaningful profit. Not many guys coming out of ECM, DCM or M&A would have a clue on how to run a proper position.

  8. @trek,

    so what you described…..how is that different to how a bookmaker operates?

  9. agreed with quanto…… putting down your own money is something that not many chaps who post here would be familiar with and whatever scale, something that will teach you a thing or two or at worst keep your ear to the ground on what is happening in prices.

  10. I spreadbet currencies and while not making 60k, I’m doing well on my short term trades. The brokers do have problems at volatile times and the staff don’t know much but with a cool head and lots of practice you can do well.

    The word ‘bet’ implies entering randomly like throwing dice or playing roulette. This is misleading but it’s not my place to beat people over the head with words and their definition. Patterns repeat themselves withing the day, especiallly on currencies. It’s a case of learning them and trading. Of course they don’t always work but with money/risk management profits can be made over time.

    Many firms are advertising like crazy as if trading’s something you can do after a few days of ‘training’. It took me over four years and thousands of pounds of losses become I could even call myself mediocre.

    People who trade this way usually get wiped out. I believe some 95% of people get wasted.

    1-2k a day? 10 a point? Try making 40 a day on 1 a point. That’s what I did for nearly a year. Quoting large profits is extremely misleading.

    Quanto knows what he/she is talking about!

  11. the problem is that betting 10 per point on the ftse is like a pointing a gun to your head – most people overtrade and overgear themselves and this is why so many lose – it doesn’t have to be like that!

    common spread betting questions and answers answered here

  12. further, the use of the word ‘betting’ is what also creates a lot of negative publicity, but it must be remembered that the companies operating in this space, have to use this word inorder to be able to offer a tax-free product – other than this, this is conceptually no different to running a book on an investment bank trading desk (bar having a research and sales force backing you up with trade ideas and greater access to capital). It all depends on how you approach it.

  13. you jokers, spread betting is the answer! get a grip i have been spread betting for 2 years with minor success. leveraging is so last year. gains have been massive and so have losses, all in all not down but i know people who are selling assets to raise cash for poor trades. not good advice. and getting a chap in from ig to say how swell it is. NO THANKS.

  14. It becomes gambling when you say to yourself: ‘just one more trade, one more….’

    I think in the near future many of the spread betting firms will fail or merge with one of the more established ones.

    When I first started I knew a guy who just kept on transferring money in on top of his losign trades. It was affecting, in a minor way, his mental wellbeing. He finally gave up and did something else.

    Overtrading/overgearing – That’s what got me in the early days. A couple of winning trades and you think your James Bond winning everything in the casino!

  15. Trading is for those who can’t do anything useful.

  16. “Trading is for those who can’t do anything useful”

    Well, I certainly am enjoying my life being ‘useless’.

  17. I can’t work out what this article is trying to say. Is it slice of life op-ed as in despatches from the world of (non) work? Or is it a you-can-do-it-too piece? I don’t know. I do know some people I used to work with who left and some started spread betting and some started sniffing glue. Both groups ended up moving in with their parents. One group had less of a facial rash, but neither option was a good idea I think

  18. I think the article is about ‘you-can-do-it-too’.

    How wrong that is!

    The high failure rate of day traders during the dot com boom bears this out.

  19. Anyone who considers Spreadbetting as a viable career needs to have their head examined.

    90% of SB firms are outright cheats.I had one so called dealer at a very well publicised firm who did bogus trades. The software is crap and on top of that rigged, they call it manual override, where they can delay, requote , reject and do many other cheats. Joker industry. Guys can email me for more details rokko99@yahoo.com

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