An Exchange Traded Fund (ETF) can be bought or sold via an online broker and some of the larger ETFs also have traded options. You can also place a financial spread bet on many ETFs, a company such as IG Index, City Index and Cantor Index will allow you to go long or short an ETF.
For example here you can see the Biotech ETF (BBH) by making one trade you would have exposure to a basket of biotech shares the top 10 holdings would include:
- Amgen Inc (AMGN): 15.10%
- Gilead Sciences Inc (GILD): 9.38%
- Biogen Idec Inc (BIIB): 8.03%
- Celgene Corporation (CELG): 6.97%
- Alexion Pharmaceuticals, Inc. (ALXN): 5.04%
- Life Technologies Corp (LIFE): 4.30%
- Amylin Pharmaceuticals Inc (AMLN): 4.25%
- Illumina, Inc. (ILMN): 4.15%
- Regeneron Pharmaceuticals, Inc. (REGN): 4.04%
- Onyx Pharmaceuticals, Inc. (ONXX): 4.00%
The advantage here is that you have diversification rather than investing in just one company in what can be a very volatile sector. By using a financial spread bet we also have the advantage of leverage and the tax free advantage in the UK.
Example Spread Bet
Let’s say we want to bet on the BBH to go higher we can buy the March 2013 contract at 5408 and we decide to trade £1 per point (not you can trade US$ or £) so a move from 5408 to 5409 is 1 point.
One month later we see the price is quoted at 5900/5920 and we decide to take profits from our Financial Spread bet so we sell at 5900. So to recap we bought at 5408 sold at 5900 = 492 points x £1 gives us a £492 profit which is tax free for UK residents. Of course we could have also done the opposite and made money from falling prices.
To learn more about making money from trading shares, using Financial Spread Betting and Traded options then go to the Vince Stanzione official site: www.winonmarkets.net