How to spread bet on indices

How to spread bet on indices 

Stock indices such as the FTSE 100, DAX 40, Dow Jones and US 500 are among the most actively traded markets globally. They represent the performance of a group of leading companies within a country or region and are widely used to gauge broader market sentiment. 

Spread betting allows UK traders to speculate on price movements in these indices without owning the underlying shares. This guide explains how index spread betting works, and how to approach it using a spread betting account like Pepperstone’s. 

What is index spread betting? 

Spread betting is a leveraged derivative product that allows you to speculate on whether a market will rise or fall.

‘Leveraged’ means that you can access a larger position for a relatively small initial outlay – the margin. Your profit and loss are based on the position’s full size, so can move quickly.

‘Derivative’ means the spread bet price is derived from an underlying market – in this case, an index. You don’t own the underlying asset. You’re simply speculating on its price movement.  

When spread betting on an index: 

• You choose to buy if you believe the index will rise.

• You choose to sell if you believe it will fall.

• You select a stake per point.

• Your profit or loss is determined by how many points the index moves multiplied by your stake.
  

For example, if you stake £10 per point on the US 500 and the index moves 15 points in your favour, the potential profit would be £150. If it moves 15 points against you, the loss would be £150.

Under current UK tax rules, spread betting profits are generally exempt from Capital Gains Tax and Stamp Duty for UK residents*, although tax treatment depends on individual circumstances. 

Indices you can spread bet on 

Some of the most-traded indices include: 

• FTSE 100 
• DAX 40 –
• Dow Jones
• S&P 500 
• NASDAQ 100 

Since each index is made up of different types of stock, each responds differently to market events – and moves at different speeds. For example, the NASDAQ 100 typically exhibits higher volatility (i.e. moves further and faster) than the FTSE 100 due to its technology weighting. 

How index spread bets work 

Index spread bets are quoted in points. One point typically represents a one-unit move in the index price and determines how much you gain or lose per point based on your stake. 

Other key elements include: 

The spread

In your platform’s deal ticket, you’ll be quoted a buy price and a sell price. The difference between the two is the spread, which represents the main trading cost. 

Stake per point

Your stake per point determines your exposure. A larger stake increases both potential returns and potential losses.

Margin requirement 

Because spread betting is leveraged, you are required to deposit an initial margin to open a position and maintain sufficient margin to keep it open.  

If the market moves against you and your account equity falls below the required maintenance margin level, you may receive a margin call asking you to deposit additional funds. If you do not meet this requirement, your provider may close your position automatically, potentially at a loss, to prevent your account from going further into deficit.  

Before placing a trade, you should define: 

• Your entry level – where you’ll open your trade, based on your analysis of the market

• Your stop-loss – the level at which you’ll close your trade if the market moves against you, to limit potential losses 

• Your target level – where you plan to take profit, aligned with your risk-reward ratio and overall trading strategy

This helps to ensure that your risk is determined before you execute your trade. 

 When Are Indices Most Active for Trading? 

Indices behave differently depending on the time of day.

Activity often increases: 

• At the local market open and market close (e.g. London open for FTSE, New York open for US indices)

• Around major economic announcements

• During periods of heightened global risk sentiment
  

Volatility and liquidity – how easily you can buy or sell – can differ significantly between the open, midday trading and the close. Ignoring these differences can increase execution risk and slippage – when your trade is filled at a worse price than the one you wanted.

Understanding when your chosen index is most active helps align strategy with market conditions can help you align your strategy. 

Position sizing and volatility 

Position sizing is a critical factor in index spread betting.

Different indices move at different speeds. For example: 

• Technology-heavy indices such as the NASDAQ 100 often experience larger intraday ranges.

• Broader indices such as the FTSE 100 may exhibit comparatively steadier price action.
  

Higher volatility generally requires smaller stake sizes to maintain more consistent risk.

Avoid increasing stake size to compensate for prior losses.  Traders generally choose a consistent level of risk for each trade based on the size of their account, to avoid risking too high a percentage at one time.

How to spread bet on indices with Pepperstone 

 If you're a UK trader, you can trade the FTSE 100 via a spread betting account with Pepperstone.

The general process involves:

1. Open a spread betting account

Complete the application process and identity verification.

2. Fund your account

Deposit sufficient funds to meet margin requirements.

3. Access the trading platform

Pepperstone provides platforms such as MetaTrader 4, MetaTrader 5 and cTrader.

4. Select your index

Choose from available instruments such as UK 100, Germany 40, US 500 or US Tech 100 (Pepperstone’s market names for the FTSE 100, DAX 40, S&P 500 and NASDAQ 100). 

5. Set trade parameters

Define:

• Direction (buy or sell)
• Stake per point
• Stop loss
• Take profit (optional)

Pepperstone’s order ticket displays margin impact and projected exposure before confirming the trade, helping you assess risk in advance.

6. Monitor and manage the trade

You can adjust or close your position as market conditions evolve. Be aware that overnight financing charges apply to positions held beyond the trading day and can affect your overall cost.

Risk management considerations 

Spread betting involves leverage and carries a high level of risk. The value of your positions can move quickly against you, and you may lose more than your initial deposit. You should only trade with money you can afford to lose and ensure you fully understand how leverage works before trading.   

Key principles include: 

• Defining risk before entry - only trade with money you can afford to lose, and consider how a loss on any single position would affect your overall account  

• Defining stop losses before entry - a stop loss can help limit potential losses if the market moves against you. Note that standard stop losses are not guaranteed and may be subject to slippage in fast-moving markets.  

• Avoiding emotional position sizing - decisions made under pressure can lead to taking on more risk than your circumstances warrant  

• Understanding macroeconomic drivers - being aware of how market developments can move your selected index helps you assess the risk of your position.
  

Spread betting provides a flexible way to trade indices, but outcomes are never certain and your risk should always be defined before you open a position.  

Generally speaking, strategic index trading is built on disciplined execution and consistent risk control. Spread betting enables you to express a view on market direction, whether over short-term or longer-term horizons. However, spread betting is leveraged and carries a high level of risk. Outcomes are uncertain, and you could lose all your deposited funds. Risk should always be defined in advance, and you should only trade with money you can afford to lose.

Spread betting is leveraged and high risk. Retail clients could lose all their deposits, while professional clients may lose more than their deposits. Make sure you fully understand how it works and only trade with money you can afford to lose.