Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.3% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.


Spread betting vs CFD trading

Trading Guides
22 Aug 2022

Investing through Pepperstone

There are various ways to invest in the financial markets through Pepperstone. We are going to discuss the differences between spread betting vs CFD trading. Although they appear similar, there are some fundamental differences that you should be aware of.

An explanation of a CFD

CFD is short for Contract for Difference.

A CFD is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at the time of closing the trade. If the difference is negative, then the buyer pays the seller instead.

To learn more about trading CFDs with Pepperstone click on this link.

An explanation of spread betting

Financial spread betting is a ‘bet’ on the outcome of a product either moving in the direction of your trade resulting in a win or, moving in the direction against your trade resulting in a loss. The ‘spread’ is the difference between the Buy and Sell price.

Unlike a fixed-odd bet that has a win or lose outcome, a financial spread bet can continue in one direction or the other. It is regulated by the FCA (Financial Conduct Authority) and not the Gambling Commission.

To learn more about spread betting with Pepperstone click on this link.


Figure 1 Pepperstone cTrader platform

What are the differences between spread betting vs CFD trading

Trading financial products through spread betting is Tax Free, from both Capital Gains and Stamp Duty. A spread bet is a trade of a monetary amount per point, or pip, on the underlying asset.

Trading financial products through a CFD is not subject to Stamp Duty as you never own the underlying asset. However, profits from CFD trading are subject to Capital Gains. This also means that losses can be offset against your CGT liabilities.

A CFD mimics the underlying asset. Buying 200 CFDs in BT (British Telecom) is the equivalent of buying 200 shares.

Similarities between spread betting vs CFD trading

Both products allow the investor to enter the market without directly dealing in FX, Indices, Commodities and Shares.

Spread betting and CFD products use leverage.

The speculator can trade short as well as long. They can buy or sell.

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.