spread betting

Definition

A form of gambling in which a person places a wager on the price movement of a stock or index. There are no fixed odds in spread betting, unlike more traditional forms of gambling, so the risk to the gambler is potentially unlimited. The company offering the spread bet will assign a spread for the basis point difference between the buying and selling price of a particular security. The gambler bets a certain amount of money for each basis point that the security moves. Spread betting bears some similarities to option trading, though the gambler is not able to assume control of the underlying security since the bet is made on the price movement alone.
In some countries, such as the United Kingdom, gambling winnings earned from spread betting are not taxed.
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