The stock market offers you a variety of interesting trading options. 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 use 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 - read more. The derivative instruments fall in the realm of speculative activity and are therefore fraught with greater risk than cash market trading.
Let us compare financial spread betting with futures trading. Basically both are leveraged or geared financial instruments where you just pay margin money to be able to trade in a much higher quantity of shares. This margin money is typically between 15-20% of the actual value of the quantity of shares you are trading in and therefore represents an opportunity for you to make quick gains should the market movement be in consonance with the position you have taken. Both do not attract any kind of stamp duty and that explains the reason why they are so popular. You get to keep the profit you make in total and that is a great advantage. However, when you make losses, those losses are for good since you cannot offset it against any profits in future.
Futures trading contracts have an expiry period and you have the liberty of holding your position till that date and allow it to expire or close the contract before the date. In any case, there is no physical exchange of shares. The futures contract price also is at a premium 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 has a premium that is incorporated into the price. You can close the position like you would do in futures or keep it till expiration and let it expire on its own.
Financial spread betting dealings are between the trader and the market maker unlike futures where the contracts are dealt with by the exchange. The regulation in margined trading is much lesser than it is in futures trading. Both derivative products do not involve any physical exchange of assets though their movements are based on the movement of the underlying.
To sum up, it is better to do financial spread betting or deal in futures trading only after understanding their nuances in greater detail.
Top brokers to trade futures:
1. CFDs - https://www.independentinvestor.com/brokers/cfds
2. Financial Spread Betting - https://www.independentinvestor.com/brokers/spread-betting