Spread betting – the main features:
- Spread betting is not currently subject to capital gains tax (CGT) or stamp duty*
- Speculate on a rising (go long) or falling market (go short)
- Trade on margin (deposit) – control the market for a fraction of the overall deal size
- Hold as long as you want – spread betting contracts roll over on expiry
- No dealing charges – spread only
Spread betting (otherwise known as spread trading) is a derivative which allows traders to gain exposure to an underlying asset (such as an equity, forex or commodity) for the difference between the opening and closing price of the underlying. Although you gain exposure to the underlying, you don’t actually own the asset. As such, you don’t have voting rights on equity spread betting positions. Our spread betting guide can help you understand more about this convenient alternative to other derivatives such as options, futures and CFDs.
Trading with Spread Betting
You can go long or short on your chosen market (e.g. a commodity price, such as gold), which means you can potentially profit when the asset moves up or down – providing of course that you speculate in the correct direction. This works very much like conventional market trading (e.g. commodity speculation). You place spread betting trades on a ‘per point’ basis (for example, £5), which means that for each point the asset moves up or down, you make or lose that amount. For example, if you went long £5 per point on gold and the gold price went up by 100 points, you would make £500. Similarly, if you did not use a stop-loss and the gold price fell by 100 points, you would lose £500. You should consider using stop-losses to mitigate your risk when trading – the best strategies usually have an ‘exit plan’ and a clear risk management policy.
Stop-losses are an invaluable tool for most traders worldwide, and are further detailed on the spread betting guide available at no cost to you. Whilst you should take time to formulate and consider your own trading strategy, it is worth considering the old adage: run your profits, cut your losses. Stop losses available from Accendo Markets trading platforms include guaranteed, automatic trailing and standard. Automatic trailing stops are useful to ‘lock in’ your profits when they arise, whilst guaranteed stops give you a little extra security against market slippage. There is a small extra charge for guaranteed stop losses.
Nothing on this page should be taken as a personal recommendation as it does not take account of your personal circumstances or attitude to risk. Please seek independent financial advice if necessary.
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*Under current UK tax law. Tax laws may be subject to change, please consult a tax adviser if necessary.