Unlike other types of financial instruments, spread betting in the UK is a tax-free* way to trade on the price movement of many types of financial instrument, including forex, indices and commodities.
*Please note tax laws are subject to change and may differ on individual circumstances. Tax laws may differ in jurisdictions other than the UK.
There are no commission charges on spread bets.
When spread betting you are trading on a margin, which means you can control a considerably larger value trade with a relatively small deposit.
Financial spread betting is a flexible way of trading the markets as you can enter the market whether you believe the price is going up – in which case you open a buy position – or the price is going down, in which case you will open a sell position. As such there are more opportunities to trade.
Spread betting can be traded 24 hours a day, Monday to Friday.
Spread betting is a flexible way of trading the financial markets without actually buying the underlying asset. This means traders can speculate on the price movement of a large array of financial markets such as shares, indices, currencies, commodities and treasuries, independently of whether they believe the price is going up or down.
A spread bet is a leveraged product, which means that traders only need to put down a small percentage of the full value of the position they are controlling. With just a small margin commitment traders can therefore control positions that are up to 100 times greater than the notional trade value. This means traders can earn profits based on a 100% investment while only putting up 1% as margin, thereby magnifying their market exposure and potential returns. However, any potential losses are amplified in the same way. It is therefore crucial you understand the risk involved and have a suitable risk management strategy in place.
Spread Betting is traded in pounds per point. The trader decides how many pounds to stake per point movement. If you decide to place a trade with a stake of £1 per point, every point movement in your favour will earn you £1 whereas you will lose £1 per point movement if the price goes against you.
When placing a bet there is a buy price (the offer) for when you are buying, and a sell price (the bid) for when you want to sell. The difference between the buy and the sell price is known as the spread. The spread constitutes your only cost of opening or closing the trade. There is no commission.
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Forex, CFDs and Spread Bets are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose.
Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions. Please click here to view our Risk Disclosure..