Online gambling is growing exponentially.

The forecasts from research consultant Datamonitor is that by 2004, European online betting will soar a hundred-fold from just £36 million last year to £3.7 billion.

If you think about it, gambling is a natural for the net - there are real-time prices.

In the City there has long been betting on the level the indices will be on gold, commodities, futures and all kinds of things.

Certificates for Difference, or CFDs, are considered a form of betting.

What you do with CFDs is buy the right to the change in share prices. You actually "own" the price change. It is like buying an option.

Say, for example, you buy a CFD on a share which is priced at 100p. You have to pay 20 per cent of the price. So you pay £200 for £1,000 worth of shares.

If the shares go up to £120p, then you have doubled your money. If they go down to 80p, you have lost your stake.

The advantages are that as you do not actually own the shares, you to do not have the commission costs and you do not pay stamp duty.

Spread betting, on the other hand, is a straightforward bet.

What you do is place a bet on what an index like the FTSE or the gold price will be by such and such a date.

Increasingly, however, spread betting is favouring individual shares.

Here is how it works. Bets are placed per point for an index or per penny in the case of UK stocks and placed for a specified time in the future, normally one or three months ahead.

Clients can close their position earlier as quotes are updated all the time.

Therefore profits can be taken or losses limited even on the same day as the bet was placed.

Against this, if you are still confident by the time the bet expires, you can roll it forward for another month, although there is a charge.

You do not have this "cost of carriage" with CFDs.

An example would be as follows - you are quoted an end of September spread of 120p to 125p.

You would pay 125p to buy a share. You can play as little as £5 per penny or per point with a spread bet.

There is no charge other than the bid/offer dealing spread and because the transaction is a bet, all profits are free of tax.

There is also no stamp duty to pay.

Let us say the shares go to 145p, then the difference is 20p - so you have made £5 times 20 or £100. On the other hand, if the shares fall to 100p, you have lost £50.

So there is certain leverage involved.

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