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How Spread Betting Works
The Risks Involved
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Very interesting post here. It’s always fascinating to learn about new types of investing that are available to the market today.
- In reading this article, spread betting reminded me slightly of options, a tool I learned about while getting my finance undergraduate degree, in the respect that you do bet on either the upward or downward movement of the underlying security.
- However, spread betting is slightly different since the spread is involved, and not just the call and put prices of the option. Additionally, with spread betting, you don’t have the “option” of refraining from transacting your bet if the result is unfavorable, as you do with options.
- Personally, although spread betting is very interesting to learn about, I don’t believe it is well suited for my personal finances. This is because 1) it would not fit in my passive investing strategy / overall asset allocation with index mutual funds and ETFs, 2) it is slightly too risky for my tastes, being as that it is a margined product, and 3) I don’t believe I have the ability to correctly time markets, currency, and/or index price movements.
- As always, when learning about new investment strategies, make sure it aligns with your current long term plan and goals to make sure you stay on the right track.
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