Financial spread betting has many benefits which is why it is so popular, but one of the largest benefits is the ability to trade on a margin.
Day trading requires all traders to pay the full price of the purchase on any shares. So if 1000 shares are purchased and each is priced at $3.12 then the total deposit amount required is $3120. This means the trader is out of pocket $3120 and unless one has additional capital may not be able to place other trades.
Financial spread betting is the wagering of the price of a financial instrument and no purchase of a stock or share occurs. A financial spread betting wager may be a buy bet of £2 per point on the spread 112-114. Since there is no purchase, there is no total amount to be configured. Instead, financial spread betting investors may pay a percentage of this bet as a deposit.
Trading on margin means borrowing money to place a bet and is very common in financial spread betting. The benefit of margin financial spread betting is that the investor gets to hold onto one’s capital which can be used to make other bets.