A day is a long time in spread-betting

IN THE 1980s, captains of industry used to complain about 'short-termism' in the City. That was in the days that short-termism meant hanging on to an investment for only a year or two. Nowadays, day-traders would laugh at that definition.

There are several thousand private investors in Britain today who aim to book profits on share trades in hours, rather than a year - not to mention the couple of decades favoured by American investment guru Warren Buffett, known as The Sage of Omaha.

Personally, I find it hard to get my brain round a time horizon of a few hours. Day-trading tends to be based on technical analysis rather than the fundamental considerations I favour. I prefer looking for moves over a few weeks.

However, the day-trading market exists - and there is fierce competition between those financial providers who are attempting to address it. Next week, bookmaker IFX plans to introduce daily spread betting on the top 100 stocks in Britain. The idea is for customers to make an up-bet or down-bet on a share and then either to close it later that day or let it expire at the end of the session.

The advantage IFX is promising is a narrower spread than it currently offers on spread bets expiring in a month's time. For instance, yesterday the bookie was quoting a spread of 177.5-179.5 for Vodafone shares in mid-December.

Its daily Vodafone quote would have been 177.8-179.2, a spread of 1.4 points instead of two points for the former.

Chris Davie, head of trading at IFX, says: 'We are tailoringa product to fit the day-trading mentality.' His daily bets will compete with the weekly share bets that IG Index, City Index and Financial Spreads offer, and the 'rolling cash' bets that another firm, CMC, provides. All these enable the speculator to take a long or short position in a share on a narrower-spread than quarterly bets expiring in December or March, and any profits made are not subject to capital gains tax.

Despite innovations such as IFX's product, spread betting faces a daunting task to win over people who daytrade with execution-only stockbrokers, and those who use another margined product, the contract for difference or CFD.

CFDs, like spread bets, enable a day-trader to go long or short of a share on margin, without paying stamp duty. In addition, the bid price and offer price on a CFD are often closer together than the up-bet price and down-bet price on a spread bet.

Dominic Connolly, head of CFD research at GNI, says: 'A smaller bid-offer gap means that the share concerned does not have to move so far for you to make a profit. That is the advantage that CFDs have over spread bets for the day-trader.'

BEWARE: Financial spread betting can seriously damage your wealth. Many bets, unless protected by a 'guaranteed stop', can result in huge losses if events go against you.