What is Spread Betting?

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.

Spread Betting explained

With tax-free profits*, the ability to trade on falling as well as rising markets and access to thousands of trading opportunities 24 hours a day, investors are taking advantage of this versatile product and making financial spread betting a part of their portfolio.

Why is Spread Betting popular with investors?

A popular product for investors, financial spread betting is a way to actively participate in financial markets.

  • Tax efficient*
    Pay no UK Stamp Duty or UK Capital Gains Tax (CGT)
  • Commission free
    Spread bets are free from commission charges
  • Leveraged product
    Use a relatively small deposit to control a larger value trade
  • Trade on rising and falling markets
    Trade on falling markets (going short) as well as rising markets (going long)

How does Spread Betting work?

When you open a spread betting position on one of our markets, you select the amount you would like to trade and your profit will rise in line with each point the market moves in your favour.

If you think the price of your chosen market will go up, you click buy. For every point it moves up, you will win your stake. However, if the price falls, then you will lose multiples of your stake.

Example
If you think that the price of oil is going to go up then you could place a buy trade with a stake of £2 a point.

This will earn you £2 for every point the price of oil rises. However, should the price of oil fall, you would lose £2 for every point the market drops.

Oil example

Trade on falling markets

Unlike traditional share dealing, if you believe a market will fall in value, with spread betting you can sell a market and profit from the falling prices. When you open a trade, click sell, this is known as 'going short'.

For example, Tesco is trading at 229.

Tesco announces that it mistakenly over stated its pre-tax profits for the last six months by £250m. You believe that the Tesco share price will fall further and decide to go short £5 per point at 229.

After two weeks, the Tesco share price has plummeted to 168p as shareholders lose confidence in the retailer.

You decide to close your trade at 168p:

Tesco spread bet trade

Spread Betting is a margined product

This means you can put up a small amount of money to control a much larger amount. This means you can leverage your money further but it also means that losses will be magnified as well, so you should manage your risk accordingly.

Remember that with leveraged trading, there is a potential for your losses to exceed deposits.

What can I spread bet on?

City Index offers a choice of over 4000 spread bet markets, including:

  • Indices such as the UK 100, Wall St , Germany 30
  • FX such as GBP/USD, GBP/EUR and JPY/USD currency pairs
  • Shares such as Rio Tinto, Amazon and General Electric
  • Commodities such as oil, gold and cocoa
  • Other markets Including bonds, interest rates and options

Is Spread Betting right for me?

Spread betting may be ideal for investors who want the opportunity to try and make a better return for their money. However, it contains significant risks to your money and is not suitable for everyone. We strongly suggest trading on a demo account before you try it with your own money.

Spread betting is ideal for people:

  • Looking for short term opportunities
    Spread bets are typically held open for a few days or weeks, rather than over the longer term
  • Who want to make their own decisions on what to invest in
    City Index provides an execution only service. We will not advise you on what to trade or trade on your behalf
  • Looking to diversify their portfolio
    City Index offers over 4,000 spread betting markets to trade on including shares, commodities, FX and indices
  • Be as active or passive as they want
    You can trade as little or as often as you want
Next chapter How To Spread Bet

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