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ANSWER 4th February 2012
Hi, Anon, and welcome back!
Let me try and explain in simple terms. Firstly as the name suggests it is a 'bet' or gambling and as such there is no tax on any profits.
We usually think of a bet as a win or lose situation such as a horse race. You bet that a particular horse will win. If it doesn't win you lose the bet. This is known as a binary bet; right or wrong, win or lose.
Now with a spread bet you are betting on the spread or the difference in the situation from when you placed the bet to the finish (a set time period, although you can close the bet at any time).
To take the example of the horse race you would be betting on by how much your horse wins the race. So your bet might be £10 for every length by which your horse wins.
So your horse must win but if it wins by one length you win £10, 2L wins £20 etc.
So we can apply this to anything including shares, in which I suspect you are interested.
Equity Spread bets come with expiry dates so if we wanted to bet on, for example, Gulf Keystone going up we might bet £10 a point on the March expiry. With equities a point is 1p so a £1 bet is like buying 100 shares and £10 is like buying 1000 shares. If the share price goes up you win so a 50p rise would win £500.
If this looks too easy consider this; to place that bet you only need a deposit of about 10% or £300 so it is quite easy to open the position which has an exposure of £3000 (1000x £3). But suppose the price falls by 100p (which it has done before) then you could instantly be losing £1000.
SB is available in FX, Indices, Options, commodities, house prices and much more (including sport, of course).