Other Options – Warrants
When it comes to spread betting there are any number of different possibilities for items to trade, far more than just the simple stocks or bonds. In addition to being able to bet on entire indexes, you can also bet on commodities, CFDs, or warrants. Most people don’t know what all of these mean, but each is slightly different and offers another market that could be mastered for potential profit.
are keen to make their customers aware of the risks involved when it comes to gambling. As spread betting is a form of leveraged betting you can win massively, and lose equally massively and you should be aware of what you’re doing before you start to risk real money on it.
Whilst warrants may not be something most punters are aware of, they are worth considering as they have been around for years in one form or another. Warrants give the right but not the obligation to buy a set number of shares for a fixed sum during a set period.
One typical example might be to offer one warrant for every five shares bought at an original price of 100p. You could buy as many warrants as your money permitted, and these would then give you the option to buy the shares at 100p no matter what the price. The warrant would permit you to do this at any time, but expire after a set number of years, and would constitute a long-term gamble on the price going up.
If the share price goes up from the original deal, you can sell the warrants and buy the shares at the higher price, after the cost of the warrant is taken out, you keep the profit. However, had the price deteriorated then the warrant that cost 100p a time would not be covered by the share price and therefore a large loss would be made.
Other warrant types allow you to bet on a rising as well as falling price. For all that, however, the investor cannot lose any more than his or her original investment, even if the share price completely bottoms out. Still, if you take a risk and load everything you have in the form of warrants and then the price does deteriorate, you would be completely cleaned out. Like other forms of spread betting there is no stamp duty, and they have the additional benefit of being relatively low cost and can be used for a sector, rather than an entire market.
Warrants are relatively simple once you get your head round them, but are more of a long-term investment than many of the other products involved in spread betting. Still, if you are confident in the long-term future of a company, maybe one that produces valuable commodities, they may well be worth the effort, and could produce a high reward.