An Introduction to Spread Betting

Financial Spread Betting is a way of dealing in the price movements of instruments such as shares, indices, sectors, currencies and commodities, without actually owning the underlying asset. The aim is to profit from the price moving in your favour, which can be a rising or, alternatively, a falling price.

Spread Bets are 'leveraged investments' which means that you can control a relative large position without initially paying for the full value of it; you will typically only need to pay a deposit of less than 10% of the full value. This means that your profit or loss is normally multiplied (or leveraged) by at least 10 times in comparison to the underlying price movement and is why Spread Betting is a high risk transaction.

What are the benefits?

More and more experienced private investors are already using Spread Betting as part of a balanced portfolio, and here's why:

• There is no dealing commission - any changes are built into the spread.
• Profits are currently exempt from UK Capital Gains Tax.
• Spread Bets are currently exempt from UK Stamp Duty.
• You can profit from falling as well as rising prices - if you trade the right way of course.
• You don't have to pay the full cost of the deal upfront.

Please note that Financial Spread Betting is only tax-free if you are a UK resident. Tax laws may change and are subject to individual circumstances. In addition, any capital losses cannot be netted off against capital gains from other investments.

Before you continue, a word of caution

Spread Betting typically requires the deposit of a small percentage of the total trade value upfront, and therefore profits and losses can quickly exceed the initial deposit, requiring you to make further payments. Ensure you understand the risks, and do not risk more than you can afford to lose. These products are not suitable for everyone; if you are in doubt please seek independent advice. This website does not constitute investment advice.