Spread bets vs CFDs

  • We offer spread betting and CFD trading across a range of powerful and innovative trading platforms which have been designed to maximise your trading potential.

    The fundamentals of spread betting and CFD trading are in fact very similar but there are some key differences.

    This section aims to identify those key differences and help you to decide which trading account to open with us. 

    Key differences:

    • Range of Markets: Spread bets and CFDs offer a broader range of markets to trade including indices, stocks and forex.
    • Trading Platforms: You can gain access to browser-based and downloadable platforms as well as ward-winning mobile and tablet trading platforms. View our Trading Platforms section.
    • Capital Gains Tax: Currently in the UK, all gains made in spread betting is free from UK Capital Gains Tax. This benefit is not applicable to gains made in CFD trading. UK Tax Laws are subject to change.
    • Commission: With CFD equity trades only you are charged a small commission for each trade you place. For all other CFD markets and spread bets, trades are free from commission, but you pay a slightly widened spread.
    • Guaranteed Stop Losses: This is available to both spread betting and CFD trading products.
    • Trade Sizes: Trade sizes differ across spread bets and CFDs. For more information, please see the table below.
    • Margin/Leverage calculations: In some markets, spread bets and CFD markets are margined differently, as either fixed percentage such as 5% or margin factor such as 60 x stake.

    At City Index, we seek to cater for all client needs and our ability to offer spread betting and CFD trading helps us to give you a greater range of markets and better trading flexibility.

     

    Spread Bets

     

    CFDs 

     

    Range of Markets

    Over 12,000 including shares, indices, FX and commodities

    Over 12,000 including shares, indices, FX and commodities

    Commission  Free  Equity markets only 
    Widened Spread Yes Non-equity markets only
    Trade Size £ per point CFDs
    Minimum Trade Size  25p per point  1 CFD 
    Margin/Leverage Margin factor or Percentage i.e. 60 x stake or 1% Percentage i.e. 1%
    Platforms Available  Browser, mobile and tablet Browser, mobile and tablet 
    Risk Management Orders  Full tools available including Guaranteed Stop Losses  Full tools available including Guaranteed Stop Losses 
    Demo Account  Yes Yes

     

    Examples of key differences between Spread Bets and CFDs

    The two key differences in the mechanics between spread bets and CFDs relate to leverage and trade sizes. Below you can find out more information about both of these two key differences.

    Trade sizes and notional value examples 

    The mechanics behind your trade size, or ‘quantity’, and how this correlates to your trade notional value differs across spread betting and CFDs. As the table above denotes, with spread bets your trade size is correlated to a stake size, whilst CFD trade sizes by the amount of CFDs.

    Spread betting stakes
    Let’s say you wanted to go long, or ‘buy’, Company ABC shares, which are currently trading at a price of 550p. You decide to place a buy spread bet of £10 per point. This means that for each penny Company ABC shares rally above 550p, you net a £10 gain.

    The notional value of the spread bet is £5,500 (£10 x 550p).

    CFD trade sizes
    Alternatively, if you wanted to buy Company ABC shares through a CFD trade, which is still trading at 550p, you could go and buy 1000 CFDs. This means that your profits or losses (P&L) will increase for each penny Company ABC shares rally or fall. Your total P&L is calculated as the difference between the opening value of the contract to the closing value of the contract.

    The notional value of the CFD trade is £5,500 (1000 CFDs x 550p).

    Leverage examples

    Your leverage or initial margin calculations also differs across our key three products; spread betting, CFDs and forex.

    Spread betting
    The amount of margin you are initially charged to place a spread bet will differ depending on whether you are spread betting on an equity market, or a non-equity market. For equity spread bets, your initial margin is a fixed percentage, i.e. 10% of the notional value of your trade. However, for non-equity spread bets, your initial margin is a margin factor multiplied by your stake size.

    For example, if you were to place a buy spread bet of £5 per point on Company ABC's shares, which have an initial margin rate of 10%, and whose price is currently 550p, your initial margin requirement would be £275 (£5 x 550p x 10%). However, if you were to place a buy spread bet of £2 per point on the FTSE 100, with a margin factor of 60 x stake, and the current indicative price is 5900, your initial margin requirement would be £120 (£2 x 60).

    CFD trades
    The amount of margin charged initially for CFD trades is a fixed percentage of the trades notional value.

    For example, if you were to place a sell CFD trade of 1,000 on Company ABC’s shares price, with it currently trading at 549p and has an initial margin rate of 10%, you would be charged an initial margin of £549 (1,000 x 549 x 10%).

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