What is spread betting?
Spread betting is a tax-free way for UK and Ireland residents to speculate on rising and falling financial markets. Like CFDs, spread bets can be used without having to own the asset in the underlying market. You can spread bet on thousands of different instruments like shares, indices, commodities, forex and more.
Spread betting is a leveraged trading product. This means you have more opportunities to profit over traditional investing by buying an asset or equity, as you can open a position with a fraction of the full value of the trade. This also means that you can lose significantly more than you deposit on a trade, so it’s important to have a good risk management plan in place.
You can also enjoy tax-free trading and the ability to buy long or sell short, taking advantage of falling markets.
How does spread betting work?
Spread betting is a type of derivative trade that allows you to speculate on the direction of an asset. You decide how much you wish to place on the trade, per point of movement.
Your profit will increase with each point the market moves in your favour. This is calculated as the difference between the opening and closing price, multiplied by the value of your spread bet.
Bid, Ask and Spread
Two prices are quoted for spread bets – the ‘bid price’ at which you can buy, and the ‘ask price’ at which you can sell. The difference between the two is known as the ‘spread’, and we offer consistently competitive spreads across all instruments.
Long and short spread betting
Unlike traditional investing, you can sell a market if you think the value will fall and profit from the drop in price. You don’t need to own the asset beforehand.
- An example: Let’s say you think the price of oil will fall and go ‘short’ by opening a spread bet to ‘sell’ the underlying market. If the market does then go down, you can exit your spread bet by closing out your position at a profit. But if the price of oil increases, your short spread bet will make a loss.
Margin and leverage
Spread betting is a margined product meaning you can put down a small percentage of the full value of the spread bet to control a much larger position.
It’s important to remember that you can leverage your money further by trading on margin as profits are calculated using the full size of your position, not just the margin. However, losses will also be magnified, so manage your risk accordingly.
Tax advantages – profits are tax free for residents of the UK and Ireland.* You don’t pay stamp duty either as you never own the underlying asset.
Trade both rising and falling markets – go ‘long’ in markets going up and go ‘short’ if you think the price is going to fall.
Access to leverage – you can use a relatively small deposit to control a larger value trade.
Huge range of markets – stock markets, indices, currencies and commodities can all be traded as spread bets and you have access 24 hours a day.
Commission-free – there are no separate commission charges.
Bet in GBP on all markets - limiting your currency risk exposure.
*In the UK spread betting profits are exempt from capital gains tax. Please be aware that tax treatment depends on your individual circumstances and tax law may be subject to change.