Spread betting is a derivatives product that allows you to trade on the price movements of thousands of financial markets including indices, shares, currencies, commodities and more.
You can use spread bets to speculate on price movements irrespective of whether the markets are rising or falling. If you go long (buy), your profits will rise in line with any increase in that price. If you go short (sell), your profits will rise in line with any fall. Similarly, if you go long on the price and the underlying stock price falls, you will incur losses. See an example of how you can spread bet with City Index.
Spread betting is a margined product that only requires you to deposit a small percentage of the full value of your position. This means that the potential for profits, or losses, from an initial capital outlay is significantly higher than in traditional trading. The margin required is typically between 1% and 10% of the total value of your position, depending on the market. At City Index, we offer prices on over 12,000 spread betting markets. See our range of markets section for more information.
Find out how you could start spread betting with City Index.
Just like other forms of trading, including traditional share dealing, we quote two prices for all our spread bets – a buy price (the price at which you can go long if you expect the underlying market to rise) and a sell price (the price at which you can go short if you expect the underlying market price to fall). The difference between the ‘buy’ price and ‘sell’ price is known as the spread.We quote tight spreads across all our markets, enabling you to maximise your profits, irrespective of whether the markets are rising or falling. We offer some of the tightest spreads in the industry, with 1-point spreads on the UK 100, Wall Street, Germany 30 and France 40. 1-point spreads are available during our market hours only.
A Daily Funded Trade (or DFT) is a spread bet where our price is based on the current market price of the underlying instrument.
DFTs are typically used for short-term trades as they normally have the tightest spreads available.
Daily financing and dividends are not included in the calculation of our price but appear as separate charges or credits to your account. Find out more about our Financing and Charges. Daily funded trades typically have a long term settlement date (as specified in the market information).
DFTs are subject to dividend adjustments. If a dividend payment is made to any underlying equity that relates to your open position DFTs, we will make an ex-dividend adjustment to those related DFTs held by you. For long positions, adjustments will be credited to your account. For short positions, adjustments will be debited.
Let's say our current Wall Street daily funded trade is 12790/12791 (sell price/buy price).
You expect the Wall Street Index to rally over the coming days and therefore open a buy position (go long) of £10 per point at 12791.
Over the next few days the Wall Street Index rallies following the release of some positive US economic data. Our latest Wall Street Daily Funded Trade price is now 12807/12808. Having reached a comfortable level of profit, you decide to cash in your gains by selling £10 per point at 12807 (our sell price).
Result: You bought at 12791 and sold at 12807, which represents a 16-point movement in your favour which, at your stake size of £10 per point, nets you a tax-free profit* of £160 (12807 – 12791) x £10.
Alternative scenario: If, however, the price of the Wall Street Index had fallen to 12775, you would have lost £160 (12791 - 12775 x £10).
Spread betting, CFDs and Forex trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
*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.
+Margin Factor is shown here as a guide only. For the current margin factor applicable to your position please refer to the Market Information on our Trading Platform.
†1 point spreads available on the FTSE 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).
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