Spread betting provides an alternative to traditional shares trading because, while there are similarities between the two, spread betting has exciting additional features:
In traditional shares dealing, you physically buy a certain number of a company’s shares in the hope that these shares will rise in value and you can sell them back later at a higher price. You can only profit if the share price increases.
However, in spread betting, you can speculate on any price movement of a company’s shares price - up or down. In stark contrast to traditional shares dealing, this means you can also place a spread bet trade on a falling share price - called ‘going short’ - something that isn’t possible in traditional shares dealing.
A spread bet is a leveraged product, which means you only need to deposit a small percentage of the full value of your position - known as margin. This deposit amount or ‘margin requirement’ varies between markets; for example, the initial deposit amount needed to place a spread bet on Vodafone is just 4%.
It’s crucial to remember that although your full trade exposure is much larger than your initial outlay, and therefore offers the potential for much larger gains, it also means that if the markets don’t move in the way you expect the losses you incur can exceed your initial deposit amount.
Learn more about how to manage your risk.
With regular shares dealing, you have to pay tax on any profits you make. But, in the UK, spread betting is currently exempt from Capital Gains Tax and Stamp Duty.*
We’ve summarised these key differences between spread betting and shares dealing in the table below so you can discover which form of trading is most suitable for you.
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*Spread betting and CFD trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.
†1 point spreads available on the UK 100, Wall Street, Germany 30, France 40 and Australia 200 during market hours on daily funded trades & daily future spread bets and CFDs (excluding futures).
**Fixed spreads are available on major FX pairs during London trading hours between 8.00am GMT and 6.30pm GMT.
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