Not so long ago, most bookmakers confined their activities to racing and sports events, along with a few “exotic” markets such as award competitions and political elections. Despite the similarity of stocks and bonds trading to gambling, betting shops by and large left investment “wagering” to brokerage firms.
That has all changed, however, with the introduction of “financial spread betting” as a category of wagering on major online sportsbooks. Bettors can choose to back or lay price indices on specific stocks or wager on whether the day’s FTSE index will be above or below a certain mark. Essentially they can make money on companies and the economy in general without actually buying or selling shares.
There are a number of advantages to such financial wagering, not the least of which is shelter from taxes on profits. Fees charged, outlays required and exposure to market volatility—all of these tend to be lower than those associated with traditional trading. In fact, many shareholders use financial spread betting to hedge against short-tem losses on their long-term holdings.
One very specific type of financial wagering is known as “futures betting.” It should not be confused with the American version of “futures” that refers to ante-post bets on sporting events. Quite the contrary, financial futures are derivative products related to the prices of commodities, such as corn, soybeans, cattle, pork, cocoa, sugar, coffee and precious metals.
By definition a futures contract is “an agreement where parties agree on a price for something now and then exchange the goods at fixed future date.” Such contracts allow both the seller and buyer to plan ahead, safe in the knowledge that a price agreed to many months before will be adhered to.
These types of agreements date back 3,800 years, when Babylonian farmers sold grain in advance of harvests. Unforeseen events could thus be avoided, from price slumps following bumper growing seasons to profiteering during droughts.
Commodities markets such as the Chicago Board of Trade were established in the 19th century to regulate and standardise futures trading. In the 1960s, futures markets opened up for non-agricultural products, first gold and silver and then copper, platinum, oil and natural gas.
Now, it is possible to go online and wagering on how the prices of such futures contracts will shift, without any intention of ever taking possession of the goods they represent. william hill Financials, for example, offers betting on a variety of instruments. They range from betting on the price in US$ of an ounce of Gold or Silver as determined by a blended feed of rates from international banks to the price of a barrel of Brent Crude Oil in US$ as quoted on the London Futures Market
William Hill also offer futures betting on foreign exchange rates, such as the British Pound versus the Euro and the US$ versus the Japanese Yen, among many pairs of currencies. One of the most popular forms of futures betting at this bookmaker is wagering on Market Indices, especially for the UK100, the Germany 30 and Wall Street, which is a derived index of the share price of the top 30 publicly quoted companies in the USA.
Futures betting can also be conducted in either of two firm, fixed odds or binary. As the name implies, fixed odds bets pay a fixed amount upon expiry. Losses are limited to the value of the total stake. This makes fixed odds betting an excellent choice for those who are new to futures betting. Binary Betting, on the other hand, is more like spread betting, but without the risk of losing more than what is staked. It is possible to win or lose, buy or sell a binary bet.
Although the word “future” may bring to mind thoughts of months, years and decades ahead, for futures betting the time intervals can be quite brief. For those who simply want to dip in and place a quick bet, there are 5-Minute Markets. Those who prefer to bet on the bigger picture can bet on Hourly or Daily Markets and let them ride until a profit objective or loss limit is reached.
Obviously, futures have come a long way since the days of Babylonian farmers and merchants. Fortunes can now be made “day trading,” carefully watching futures prices rise and fall and closing open bets to lock in profits or cutting losses prior to the close of trading. All it takes is a bankroll and a willingness to take some risks—the very definition of a gambler.