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The stock market provides you with a number of intriguing trading options. That you can do normal day trading in shares or currency in the physical space or if you are more adventurous and wish to make optimum utilization of limited monetary resources, you can go for trading in derivative instruments such as financial spread betting or margined trading, futures trading or cfd trading. The derivative instruments fall in the arena of speculative activity and therefore are therefore fraught with greater risk than cash market trading.

Let’s compare financial spread betting with futures trading. Basically both of them are leveraged or geared financial instruments where you just pay margin money in order to trade inside a higher volume of shares. This margin cash is typically between 15-20% from the actual worth of the amount of shares you are trading in and therefore represents an opportunity for you to definitely make quick gains if the market movement be in consonance using the position you’ll have taken. Both do not attract any kind of stamp duty which explains the key reason why they’re very popular. You’re able to keep the profit you are making as a whole and that’s an excellent advantage. However, when you make losses, those losses are for good because you cannot offset it against any profits in future.

Futures trading contracts have an expiry period and you’ve got the liberty of holding your position till that date and allow it to expire or close the contract prior to the date. In any case, there’s no physical exchange of shares. The futures contract price is also confined compared to the underlying and this is referred to as the funding charge.

Financial spread betting also has a expiration period and the price already includes a premium that is incorporated into the cost. You are able to close the position like you would do in futures or ensure that it stays till expiration and let it expire by itself.
Financial spread betting dealings are between your trader and the market maker unlike futures where the contracts are handled by the exchange. The regulation in margined trading is much lesser than in futures trading. Both derivative products do not involve any physical exchange of assets though their movements provide the movement from the underlying.

To sum up, it is better to complete financial spread betting and / or deal in futures trading only after understanding their nuances in greater detail.

Get more details on the many differences as well as commonalities of these 2 derivatives – Financal Spread Betting and Futures Trading at independentinvestor.co.uk.