Spread betting is when you speculate on price movements within a financial market, for example Forex, Shares, Indices or Commodities.
You can choose to open either a Buy position (sometimes called ‘going long’) or a Sell position (sometimes called ‘going short’), depending on whether you think the price of that asset will rise or fall.
Unlike with traditional forms of investing, when you Spread bet, you don’t own the asset you are trading on. Rather, you are trading on price movements within the underlying market.
For example, if you decided to trade on Apple Shares, you would not own actual shares in the company but your Spread Betting position would allow you to potentially trade fluctuations in Apple’s Share price.
Spread Betting profits are free from Capital Gains Tax in the UK* and you won't pay Stamp Duty either.
When you open a position on any market using your Spread Betting account, you will first select a stake size in pounds, or your chosen account currency, and, once your position is live, for every point the market moves in the direction you have predicted, you will win a multiple of your stake.
Remember, this works both ways, so if the market moves against you, you will lose the equivalent stake for every point the market moves in the opposite direction to what you have predicted.
You may be wondering what the “spread” in Spread Betting refers to. As we have seen above every Spread Betting market has two prices quotes, the Sell price and the Buy price.
If you believe the market will fall, you would open a Sell position and if you think that the market will do well, and that it’s price may rise, you would open a Buy position.
The “spread” refers to the difference between the Sell price and the Buy price of a market, the tighter the spread the less a market’s price needs to move in the direction you have predicted in order for you to profit.
Spread Betting profits are free from Capital Gains Tax (CGT)* and because markets are open 24/6, there are plenty of trading opportunities available across a wide variety of markets.
What are some of the advantages of Spread Betting?
Investors may choose to Spread bet for a variety of reasons, many do so because Spread Betting offers a number of benefits over more traditional avenues of investment. Some of the key advantages of financial Spread Betting include:
- Tax Free trading* - Spread Betting profits are free from Capital Gains Tax in the UK and you won’t pay Stamp Duty either
- Go long and short - when you Spread bet you can go long as well as short, allowing you to trade market volatility
- Round the clock trading - Spread Betting markets are open around the clock meaning you can trade throughout the week at a time that suits you
- Plenty of trading opportunities – At ETX you can Spread bet on a wide range of global markets including Forex, Indices, Shares, Commodities and Cryptocurrencies, giving you the chance to take advantage of market movement
- Trade on leverage – When you Spread bet you are trading on leverage, this means that you are able to open a position with a larger exposure than you might otherwise be able to, with a relatively small initial investment
Which markets can I Spread Bet on?
When you trade with ETX you’ll have a wide selection of thousands of global Spread Betting markets to choose from.
We offer competitive spreads on a range of asset classes, giving you plenty of choice in selecting the trading opportunities that are right for your chosen trading strategy.
Here are just a few of our most popular Spread Betting markets, you can see a full list of all of our available markets on our Trading Costs page.
- UK 100
- Wall Street
- Germany 30
- SP 500
- US Tech 100
- Lloyds Banking Group
- Brent Crude
- Bitcoin Cash
* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
Is Spread Betting for me?
Spread Betting could be right for you if you are looking for a way to speculate on movements in market prices and want to have a wide variety of asset classes to choose from.
It may also suit your trading style if you understand how leveraged trading works or if you’re looking for a flexible financial vehicle to help support your current portfolio and investment goals.
When you Spread Bet with ETX you’ll trade on our award-winning TraderPro platform that features powerful tools to help support your trading decisions.
You can also check or adjust your open positions on the go by trading with our advanced iOS and Android trading apps.
Read the next section of this guide on Spread Betting to learn how to place your first Spread bet and for more information on responsibly managing your risk.