Word: spread
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Dates: during 2000-2000
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Skeptics have long compared stock markets with casinos, with brokers as thinly disguised bookies. Guess what? In Britain, at least, some bookies are now acting like brokers and taking wagers on the directions of stock markets, an exercise called spread betting. The fad is rapidly gaining converts among serious investors as an innovative way to play markets, though a lot of others remain, well, skeptical...
...Spread betting first hove into view in the mid-1970s, when a British sports bookmaker--betting is legal in Britain--devised an esoteric, high-risk means of gambling on the future of market indices. Instead of betting the fixed odds of a victory, a fan can bet the point spread on a vast array of future movements; today bets can be made on just about any indicator, including indices, share prices, currencies and commodities. Though spread betting occasionally looks the same as dabbling in futures markets, typically the bets are smaller and more specialized, an attraction for the individual investor...
Here's how it works: a betting firm offers a spread--the range from the buy quote to the sell quote offered by the bookmaker--on, say, what the level of London's Financial Times Stock Exchange 100 Share Index will be three months hence. Let's say the spread is 6,700 to 6,710. You think it will be a bearish market, so you sell at 6,700, at $15 an index point (the bet amount can, of course, vary). The market does indeed drop 150 points, to 6,550, and you collect $2,250 in the example...
This is one game where the bookies like it when customers win. Why? Partly because the bookies usually profit by adjusting their spreads and by constantly trading in the underlying markets to hedge clients' bets. More often than not, they come out ahead. "Last year our clients made more than they lost, yet we had a record year as well," says Michael Murray, associate director at IG Index, a London-based firm that pioneered financial spread betting 26 years ago and remains the market leader. IG Index set up shop as a financial spread-betting bookmaker, initially offering spreads...
...Mittelstaedt said that he doubts that the new program will spread the Wharton School faculty too thin, as many Wharton faculty members on sabbatical already conduct research in the region...