Benefits of spread betting

Spread betting provides an alternative to other forms of investments such as share trading.

Tax-free profits & no commission

All profits made in spread betting are exempt from UK Capital Gains Tax and UK stamp duty*. Spread bets do not incur any commission.

Trade on margin

A spread bet is a leveraged product, this means that you only need to deposit a small fraction of the overall value of any trade, known as margin. For example, if the margin requirement for a trade is 10% then you would need 10% of the full value of the trade in your account to open the position.

If you were shares dealing, you would have to put forward the full amount of the value of the trade.

Below is an example of the difference between buying 1000 shares in Barclays and the equivalent spread bet of £10 per point. Barclays is currently trading at £250.

Spread betting vs shares

In the example above you made a return on investment of 100% vs 4% if you had bought physical Barclays shares. However, had the trade moved against you your losses would have been magnified in the same way.

Ability to go long or short

Spread betting is one of the few forms of financial trading that enables you to profit from falling market prices. So you can potentially make a profit regardless of the direction in which the markets are moving.

If you think the markets are going to rise, you go long on the price (buy). Your profits will rise in line with any increase in that price (and your losses will increase in line with any fall in price).

If, on the other hand, you think the markets will fall you go short on the price (sell). Your profits will rise in line with any fall on that price (and your losses will increase with any rise in price).

Short term trading opportunities

Where traditional investors might buy and hold physical stocks over months or even years, with spread betting you can benefit from shorter-term market volatility.

Typically, spread betters look to hold positions over minutes, days and weeks rather than over the longer term as spread betting presents more short term trading opportunities and the low costs also facilitate a short-term trading style.

Trade on a wide range of markets

When you spread bet you will have access to a much wider range of markets than with traditional forms of investing, including commodities, currencies, indices and bonds.

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.

Feature Spread betting Shares dealing
Free from UK Capital Gains Tax* – no CGT to pay on your trading profits checked
Free from Stamp Duty* checked
No commission – spread bets are free from commission checked
Ability to go long – buy and take advantage of rising prices checked checked
Ability to go short – sell and take advantage of falling prices checked
Ability to hedge – go short and mitigate against potential losses in your shares portfolio checked
Leveraged trading – gain a large exposure for a fraction of the value checked
Immediate dealing – instant trading both in and out of a market checked checked
Access to other asset classes – such as indices, FX, etc checked
Access to global shares – trade over 4000 different markets from around the world checked checked
Receive dividend and interest adjustments checked checked
Physical ownership – benefits include the ability to attend AGMs checked
Pay overnight financing charge checked

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