AMATEUR investors are trying their hand at spread-betting — which enables punters to make leveraged bets on the movement of shares — to outperform a static stock market.

Capital Spreads, a City spread-betting firm, has reported a record amount of trading in July — traditionally a quiet time in the market — with investors having a punt on stocks such as Abbey and Marks & Spencer, which have been the subject of market speculation.

Frustrated day traders who aggressively buy and sell shares over the internet, often using broadband and online trading technology, are changing tactics as volatility on the benchmark FTSE 100 index hits a five-year low.

Critical to spread-betting’s appeal in the current market climate is the leverage it offers: holding a £1,000 deposit allows a trader to place a £100-a-point bet on a share that can yield the equivalent returns that would be made if an investor held £10,000 of that stock.

Spread-betting also has the added dimension of enabling punters to “short” a stock and make money as the share price falls.

Ian Jenkins, head of financial spread-betting at Cantor Index, says: “People trading shares are struggling because there is no market movement that warrants action, either to cut the loss or to take a profit.

“Spread-betting gives you the ability to be quick on your toes but it is intrinsically higher-risk as you can lose more than the minimum deposit required to make a trade.”

Justin Urquhart Stewart, director of Seven Investment Management, fears that “uninitiated and inexperienced” share traders are being targeted by spread-betting firms.

He is adamant that spread- betting should never be undertaken by orthodox share traders unless they have received comprehensive training in the risks of this type of investing.

Mr Urquhart Stewart says: “Contracts for difference and spread-betting provide a good way for investors to gear up and make money, provided that they know what they are doing. Otherwise, it would be wiser to take a wad of £5 notes and burn them in the street.”

He says that spread-betting should account for only 5 per cent of an investor’s overall portfolio. “Do not kid yourself into believing you are a natural because you made a few good trades. You would be better off putting all your cash on the 2.30 at Newbury,” he says.

Philip Smith, 37, a company director from Hampstead, regularly makes £100 and £250- per-point bets using Capital Spreads’ online trading platform. He says: “People are looking at alternative ways of making money — spread-betting allows you to trade higher amounts without paying a significant premium.”

Jonathan Hufford, managing director of Spreadex, another spread-betting firm, says: “Even in flat and falling markets, some spread-betters are able to make good profits whereas if you hold stock with a traditional broker this is impossible.”