What is Spread Betting?
Spread Betting is a form of derivative trading and investing enabling you to gain exposure to the financial markets without physical ownership of the underlying asset. Rather than buying or selling the underlying asset you are simply taking a position on whether the market will rise or fall.
The term ‘derivative’ means that the price is derived and moves in line with the underlying asset. Spread betting enables you to profit from the market movements with only a fraction of the total position value as deposit. This is known as leveraged trading, whereby only a portion of the total value needs to be deposited in your account in order to open a trade. This means that you will be able to gain exposure in positions that have larger value than the initial deposit or that you can assume positions with smaller outlay.
Spread betting offers a flexible alternative to other means of trading as it allows exposure to a wide variety of markets. You can trade both in rising and in falling markets, depending on your point of view of the future price movements. Since you do not trade the underlying asset, the costs usually associated with the physical ownership, such as account management fees, commissions or stamp duty, do not apply, lowering the trading costs accordingly. In addition, profits from spread betting are currently free from Capital Gains Tax†.
The Spread is the difference between the price that you can buy at and the price that you can sell at. If you think the market will rise you can buy (go “long”) or you could sell (go “short”) of you think that the market will fall. Our spreads are highly competitive with as little as 1 pip between the buy and sell price. The tighter the spread, the less the market has to move before you’re in profit.
†Spread Betting is currently free from Capital Gains Tax (CGT) and there is no stamp duty. It should be noted that tax treatment depends on your individual circumstances and may be subject to change in the future.