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What is Spread Betting?

Financial spread betting is a cost effective, tax free* alternative to traditional share trading. A financial spread bet allows an investor to bet on whether the price for a given financial instrument is likely to go up in value (strengthen) or go down in value (weaken). Just like traditional share trading, your profit or loss is the difference between the price at which you buy and the price at which you sell. Buy low and sell high to make money.

What are the benefits of Spread Betting?

Ability to trade a wide range of markets, see the list here. Trade on Margin, more about this here. Potentially make money when the market falls, more about shorting here. Spread bets are also commission free, so are cheaper than traditional share trading. The added plus of needing no middleman means you will save time and money. And you pay no Capital Gains Tax or stamp duty*.

I've heard it's tax free*, is this true?

Profits from spread bets are not typically taxed* as capital gains. Spread bets are also free from stamp duty*.

What is going short?

With spread bets you are not actually buying or selling shares at all, you are only making a bet on which direction the share price will move. This means that you can ‘go short’ or bet on the price of shares falling. In traditional investing, private investors are not able to go short as you cannot sell something you do not own.

How do you make (or lose) money with spread betting?

A financial spread bet allows an investor to bet on whether the price for a given financial instrument is likely to go up in value (strengthen) or go down in value (weaken). Your profit or loss is the difference between the price at which you buy and the price at which you sell. Buy low and sell high to make money.

Spread betting means investors don’t own the physical share, but bet solely on price movements. This gives investors the opportunity to profit whether the markets are rising or falling. If you get the market direction right then you make profits but if you get the market direction wrong it means you make losses.

If you believe the share (or index, commodity or other market) will go up, you buy at the offer price - the higher of the two prices quoted. If you believe the share is going to go down your bet will start at the bid price - the lower of the two figures.

When you place your bet you will be asked to say how much you want to bet on a per point or per penny basis. For example, if you were betting on a UK share at £10 per point you stand to win, or lose, £10 for each penny the UK share price changes. This bet stands until you choose to close it.

What are the costs involved?

Spread bets are commission free, so are cheaper than traditional share trading. The added plus of needing no middleman means you will save time and money.

Do you have any spread betting examples

We have put together a group of examples, but before you get started, read these three quick definitions that will be helpful in the examples:

Margin – the fractional amount of the trade value required as a deposit

Financing charge – the fee you are required to pay for trading on margin

Libor – the base interest rate that banks receive

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