Spread Betting

Spread betting is a tax-free way to speculate on the price movement of a financial market,* without actually owning the underlying asset. Instead, you predict whether your market’s price will rise or fall, and the degree to which you are right or wrong determines your profit or loss.

What is The Spread

Spread betting gets its name from the spread – or the two prices that are always wrapped around the underlying market price.

The costs of any given trade are factored into these two prices (known as the offer and the bid), so you will always buy slightly higher than the market price, and sell slightly below it.

If the FTSE 100 is trading at 6545.5 and has a one point spread, for example, it would have an offer price of 6546 and a bid price of 6545.

When financial spread betting, you are placing a bet on whether the price of a financial instrument will move above or below the spread.

Spread Betting on Shares

Say Apple is trading with a sell price of 135.05 and a buy price of 135.20.You anticipate that Apple shares are going to rise in the next few days due to a new product release tomorrow. You decide to go long on (buy) Apple shares for £10 per point of movement at 135.20. After three days, Apple shares have indeed moved in your favour and increased to 135.50/135.65. You decide it’s a good time to close your trade. This means you’ll be coming out with a profit of (13550 – 13520) x 10 = £300, excluding any daily funding charges.

On the other hand, if you originally decided to sell Apple for £10 per point at 135.05 and then closed at 135.65, you would have ended up with a loss of (13565 – 13505) x £10 = £600. Once again, excluding any daily funding charges.

Spread betting

  • No capital gains tax*
  • No commission, just our spread
  • Easy to bet in the currency of your choice
  • Deal on rising and falling markets
  • Leveraged access to the markets
  • No stamp duty
  • 24-hour dealing
  • Use prices based on the underlying market

Spread Betting vs CFD’s

CFDs

  • Direct market access (DMA) on forex and shares
  • Trade at the market price on shares
  • Losses can be offset against profits for tax purposes
  • Deal on rising and falling markets
  • Leveraged access to the markets
  • No stamp duty
  • 24-hour dealing
  • Use prices based on the underlying market

Why Spread Betting

It’s tax free*. You won’t have to pay any capital gains tax or stamp duty on your profits.

Small margins. Spread betting is a leveraged product, which means that you don’t have to put up the full value of your position in order to trade.

You can short the market. As you are simply placing a bet on the direction in which an asset’s price will move.

Quick execution. In most cases you’ll simply pick your market, your bet size, ‘buy’ or ‘sell’, hit confirm.

The thousands of available markets. Including forex, indices, shares, commodities, interest rates, options, digital 100s and more.

24-hour markets. Round-the-clock dealing on certain markets, you can open and close positions even if the underlying market is shut.

No commission. In contrast to equity CFDs, there’s no commission to pay. Instead, the cost to open a position is contained within the spread.

It is important to understand the risks involved and have suitable risk management strategies in place.

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