That's an improvement of 80 points on what you paid, which at £20 a point is £1,600 profit. Of course, if the unthinkable happens and the FTSE drops between now and September, you would lose £20 a point. You will also kick yourself for not having foreseen the market fall, in which case you would have "sold" the FTSE at 5,940 and watched gleefully as the barometer fell But you didn't and that's life. Better luck next time.Take out a contractA Contract For Difference is technically not a bet but a share transaction. It enables you to deal in a share at the current market price without having to outlay the full price of the share. IG Index acts as the principal in buying the share and allows you to secure the full profits (or losses) of the share, though you only have to outlay one-fifth of the full purchase price.
It's referred to in the jargon of the trade as "dealing on margin" and enables you to acquire shares valued at up to five times what you are prepared to lay out. There will be a small transaction commission typically 0.25 per cent plus a reasonable amount of interest on the loaned money which is calculated and added to your bill at the end of each day.Here again you can go "long", which means you believe the share price will go up, or "short", which means you think the price will go down. At no time do you actually own the shares, although if a dividend is paid during the period your position is open you will be credited with it. There is no closing time for these CFDs, you can keep them going as long as you like, but remember you will be paying the interest on the money loaned to you. And because a CFD is a share transaction and not a bet, the profits will be subject to consideration for CGT.The whole spread-betting business is fascinating, but is it for you? If you fancy a flutter it is, and let me give you another scenario. You have a safe, long-term share portfolio of, say, £250,000, but an uncomfortable feeling the market might be heading for a substantial fall. You can liquidate your portfolio now, wait until the markets turn and buy the shares back again.
Depending on the kind of broker you use it could cost you up to 5 per cent in transaction costs plus a substantial capital gains tax liability because you have realised your profits.Alternatively, you could take out a "short" bet that would cover your losses if the market goes down. Transaction charges would be negligible and you would also have no tax liabilities.terry.bond hemscott . It looks as though indices - or rather what goes into them - will be something of an enduring theme this month. Last week there was the news that FTSE International and Morgan Stanley were to alter the basis on which their indices are calculated This week we have been suffering the consequences. Quick and easy online searches for all yourinvestment needsIt looks as though indices or rather what goes into them will be something of an enduring theme this month. Last week there was the news that FTSE International and Morgan Stanley were to alter the basis on which their indices are calculated. This week we have been suffering the consequences. Those companies most affected have been enjoying additional volatility.
