The widely fluctuating state of the financial markets has seen city traders and businesses alike crumbling, but amateur gamblers in the West Midlands have been making unexpected profits from betting on tumbling share prices.
Although spread betting has been more commonly associated with predicting the scores of sports matches, it has seen a surge in popularity in the financial market – and it’s all been attributed to the current volatility of the stock markets.
Financial spread betters in Birmingham have seen five per cent more winning months than the average trader and Birmingham traders’ losses are 61 per cent less than the average, according to research conducted by financial spread betting company Capital Spreads.
People have been cashing in partly because the unique nature of spread betting means that it’s possible for investors to bet on the fall of a given stock or index at a future date, instead of the more classic win-lose outcome, as the success of the bet is based on the accuracy of the investor’s prediction of an outcome.
Head of Capital Spreads, Simon Denham, said that they were seeing a huge upturn in interest from retail investors in the West Midlands – and across the UK as a whole – who feel they can make a profit from trading the financial markets.
He added: “The rewards can be great but it is vital to realise the risks of spread betting are also high, especially in these turbulent market conditions.”
In 2009 Capital Spreads has seen an increase of monthly account openings from people in the West Midlands of 160 per cent, whereas there has been an increase of just 43 per cent per month for new clients outside the region.
One of the most attractive aspects of spread betting, particularly for high-rolling investors, is that its classification as gambling under British law means that all profits are exempt from capital gains tax and stamp duty and is regulated by the Financial Services Authority rather than the Gambling Commission.
But where the wins can be huge, so can the losses.
Unlike more traditional forms of gambling where you only lose your stake money, profits and losses are potentially unlimited as Newcastle United owner Mike Ashley discovered when he lost up to £300?million in September after placing a huge financial spread bet on HBOS.
Mr Ashley – like many City experts – believed its share price would increase but instead lost £800,000 for every penny wiped off the bank’s share price as it plunged from just under £6 each to 88p – which saw the footballing tycoon lose £100?million in just one hour.
It’s not all bad news though as potential profits are also uncapped, which means that investors can receive a much greater return than simply investing in a commodity itself.
The internet and the development of financial spread betting applications for PDAs, iPhones and Blackberrys have also been attributed to the overwhelming interest which has lead Capital Spreads to organise a free “Learn to Spread Bet” seminar – its first outside of London – on Tuesday, April 28 at Maple House, Corporation Street, Birmingham.