A financial spread bet is a way of trading on an asset, such as a share or a commodity, or even an entire market, such as the FTSE 100 index, without having to physically own that asset.
Spread betting involves taking two-way bets on the movement on assets such as foreign exchange, stock indices and commodity prices. An investor may make a bet while the spread betting firm acts as the counter party.
The spread betting firm quotes buying and selling prices in 'points' based on the actual price of the asset in the market, and you, the investor, bet on those prices. Every point that moves in your favour results in a win in multiples of your stake - and every point against you results in a loss of multiples of your stake.
If you think that an asset will rise in value, then you 'buy' the spread bet and aim to sell it at a higher price. This is known as "going long". If you think that an asset will fall in value, then you would 'sell' it and aim to buy it back at a cheaper price. This is known as going short.
In December 2013 it was reported that the pool of people spread betting in the UK had shrunk by 8 per cent over 2013, according to research firm Investment Trends. The decrease in numbers of spread betters was put down to improved sentiment in UK shares meaning investors no longer felt they had to try to cash in on market volatility.