What are the benefits of spread betting?

Spread betting is a form of leveraged trading that involves betting on whether a market is headed up or down. The further the market moves in your chosen direction, the more profit you make. But the further it moves against you, the bigger your loss.

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1. Tax-free profits

First of all, it’s tax free*. When you buy and sell shares, you have to pay capital gains tax on any profits you make. When you spread bet, any profits you make are yours to keep. And since you never actually own the underlying asset, you don’t have to pay stamp duty either.

2. No commission

You also don’t have to pay commission when spread betting, as the cost of opening your position is covered in the spread.

The spread is the difference between the buy and sell prices you’ll see listed on your spread betting platform. Instead of charging a commission to open your position, a spread betting provider will add their costs onto the market prices that are available on the underlying market.

So if EUR/USD is trading with a market price of 1.1875, a spread betting provider might let you buy at 1.1878 and sell at 1.1872 – adding a 0.6-point spread.

However, there could be other charges to pay once your position is open. You might have to pay overnight funding charges, for instance, depending on the type of contract you trade.

3. Spread betting is a leveraged product

As a leveraged product, spread betting can help your money go further. This is because leverage enables you to open a position that is much larger than your initial deposit – but also brings added risk, including the risk that you can lose more than what you put down.

When you open a spread betting position, your provider will only ask you to deposit a percentage of your total trade size, known as the margin rate. Say, for example, that you want to place a bet equivalent to £1000 on Apple. If Apple’s margin rate is 20%, then you may only have to put down £200.

But remember, as profits and losses are based on the full size of your position, your losses could end up larger than your initial deposit. At IG, we recommend that traders use leverage wisely, and take care to manage their leverage.

Spread betting leverage example

4. Shorting the market

With spread betting, going short is the same as going long, because you are betting on the direction in which an asset’s price will move instead of buying it. That means you can benefit from falling markets as well as rising ones.

Say you wanted to open a short position on the FTSE. You’d trade at the ‘sell’ price instead of the ‘buy’ price on your dealing platform. Bet £5 per point, and for every point that the FTSE moves downwards you’ll earn £5. For every point that the FTSE moves up, you’ll lose £5.

Shorting the market example

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5. Thousands of markets

An online spread betting platform can give you access to a huge range of markets. With IG, for example, you can choose from:

And you don’t have to open lots of different platforms to access different markets – all of our 15,000 markets are available via a single login.

6. Range of trading platforms

You don’t need any specialist software to start spread betting: once you open your account, you can trade via your web browser, mobile phone or tablet. All your open positions and watchlists will stay the same across all of IG’s platforms and apps, so you can take your trading with you anywhere.

And if you’re looking for more advanced technology, you can access tools like ProRealTime, MetaTrader 4 and L2 Dealer to give an extra edge to your trading. Find out more about all our platforms and apps.

7. Out-of-hours trading

Normal trading hours vary per market – shares and commodities trade when their underlying exchange is open, while forex and cryptocurrencies trade 24 hours a day. You can spread bet during regular trading hours, but some spread betting providers also allow you trade certain markets outside of hours.

With IG, for instance, you can trade key indices around the clock, and the FTSE 100, Wall Street and Germany 30 over the weekend – alongside all our cryptocurrency markets.

We also offer ‘all sessions’ trading on key shares, so that you can trade in both pre and post-market sessions, as well as within normal trading hours.

It is important to keep in mind, though, that a market’s opening price may differ from its out-of-hours price.

Learn more about spread betting at IG.

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* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.