Around eight years back, I started to notice that some friends of mine had quit their jobs but carried on to live very luxurious lifestyles - seemingly without doing very much. I thought they must simply be using up their savings until I discovered they were all making an incredible living by spending just a few hours per week doing something I had never heard of before - "financial spread betting".

More and more people are now becoming familiar with the phrase "financial spread betting". Once, the sole preserve of City Whiz kids or sophisticated gamblers, financial spread betting is currently becoming more popular as a great way to earn a really sizeable tax-free income without the risk of losing the shirt off your back!

So why is financial spread betting becoming very popular. Well, with a bit of understanding and practice, ordinary people, without any prior experience, can earn huge sums while controlling their risks and limiting their losses. You do not even need a stockbroker or a city dealing account to get involved. An on-line account is very simple to open and anybody with internet access can do it.

Spread betting, a.k.a. futures trading, is simple to comprehend if you follow a simple index much like the FTSE 100 or the DOW JONES.

In basic terms, this is how it works:

When you buy a 'future', you take a position on what you think the index (e.g. the FTSE 100, or the DOW ) will be at some future date - e.g. June 2005. Suppose the FTSE is currently at 5200 and you think it'll rise over the next three months as 'terrorist fever' abates. You'd buy the June FTSE at (say) GBP10 per point. For every point it rises, you make GBP10. If it goes up 100 points, you make GBP1000. Of course, if you get it mistaken and the index falls by fifty points (say), you lose GBP500.00.

You need, of course to be very conscious of the risks before you get involved. Just like any investment or business, you can lose money. If, by nature, you are a timid, cautious individual, then it's definitely not for you. But if you have some money to play with, and aren't risk adverse, then financial spread betting is the one of the best possible ways you can make a great deal of money completely tax free and there are brilliant ways of limiting your losses so you never lose more than you can afford.

Not like most businesses, it's possible to get involved with a complete minimal outlay and take a position without buying a single thing. You do have to 'back' your position with a particular amount of cash, but this is 'insurance' money, NOT stake money.

The ideal thing is you can try it for free without any risk at all. You can 'dry trade' with 'monopoly' money till you get a feel for the way it works and are confident enough to start using real money.

Financial spread betting has become so popular primarily because of the relationship between risk and capital. It is extremely leveraged and you can make huge profits with only a limited amount of capital and risk. The fact that there is (not like with the majority of investments) no stamp duty or tax likewise tends to make it very appealing.

So if you are of the right temperament, spread betting could be a very profitable means of making an incredible income in your spare time. But be cautioned, if used recklessly or without the correct knowledge, it can result in large losses.