I have no intention of spread betting but just have a query.
I understand the principle behind it but where does the money come from.
Say I bet £10 a point on ftse rising and it went up 60 points - I win £600
But where does that money come from?
people who lost out other bets? the spread betting company?
thanks
yes.
tim
In message , tim..... writes
If you bet on a horse and by some stroke of luck it wins where does the money come from?
This is similar, some people will have bet one way and others will have bet the other, the person making the market takes bets both ways and profits or looses based on the outcome. However, they can move the price slightly to weight it in one direction if they see too much one way traffic. Alternatively if all the bets are larger and one way apart from changing the price they will lay it off against the futures market still making a profit from the margin between the buying and selling prices. They operate in a similar way to Bookies but in spread betting they normally carry the least risk they can and benefit mainly from the spread.
Either from people who bet on it going down, or from them putting a corresponding amount of money on the FTSE to hedge your bet.
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