Ryan Kneale, explains the differences between spreadbetting and fixed odds financial betting and which you might be best suited for.
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Sam: In a nutshell, can you describe both investment options (fixed odds and spread betting) for those of our readers not already familiar with the asset class?
Ryan: Both financial spread betting and fixed odds financial betting are forms of wagering on the movements of the financial markets, but several key differences exist between the two.
In a spread betting scenario, the pay-off is based on the accuracy of the wager, rather than a simple 'win or lose' outcome. A spread bet can win or lose more money based on a range of outcomes. The more the market moves for or against you, the more you win or lose. Spread betting has been a major growth market in the UK in recent years, but although reward levels are potentially high, it carries a high level of risk.
Spread betting prices can be very volatile and the resulting losses may require further payments to be made beyond the stake that the punter initially deposited. This high risk / reward profile makes it a good opportunity for those with in-depth knowledge of the financial markets.
Fixed odds financial betting, on the other hand, offers a more flexible approach, allowing the user to choose the terms of their bet and be quoted odds on it, in much the same way as sports bookmakers operate. Bets can still be placed on the market moving in either direction, but high levels of financial expertise are not essential as risk is limited, with betters standing to lose no more than their stake money but being able to win a lot from very small moves in the market.
This makes fixed odds financial betting a great way to learn about and experiment with the financial markets, before graduating on to more sophisticated trading platforms.
Sam: Are these regulated investment options?
Ryan: Spread betting is FCA regulated and sites offering these services adhere to very strict guidelines on who can open an account. This ensures security, but makes such services more difficult to access.
While also subject to strict regulations, fixed odds financial betting is an easier way to start speculating on the markets. It is simple to understand, takes just two minutes to open an account and is a great place to learn about trading.
Sam: What is the investor profile for both fixed odds and spread betting?
Ryan: Spread betting platforms tend to attract more experienced professionals, looking to put their financial know-how to profitable use.
Conversely, fixed odds financial betting provides a great platform for learning about the financial markets, and frequently attracts people without professional expertise. The security of only being able to lose stake money and the opportunity to win many times this amount appeals to a wide range of people.
Sam: What outside influences in the market affect these asset classes?
Ryan: Any factors which can impact on stock indices or the forex markets could also exert an influence on both the spread betting and fixed odds betting markets.
Recent examples of economic movements that have reflected on online financial bookmakers have included soaring oil prices, the falling dollar, and the decrease in confidence in banking sector stocks. The more volatility there is in the markets, the greater opportunity for clients to profit. This leads to more betting on the markets as the odds of winning improve as the financial markets get choppy.
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