What Is A Spread In Betting - Sports Betting

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What Is A Spread In Betting

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What is Spread Betting?

What is Spread Betting?

Spread betting is a derivatives productВ that allows you toВ trade on the price movementsВ of thousands of financial markets and instruments including indices, shares, currencies, commodities and more.В В

You can use spread bets to speculate on price movements irrespective of whether the markets are rising or falling. If youВ go longВ (buy), your profits will rise in line with any increase in that price. If youВ go shortВ (sell), your profits will rise in line with any fall. Similarly, if you go long on the price and the underlying stock price falls, you will incur losses.

Spread betting is aВ margined productВ that only requires you to deposit a small percentage of the full value of your position. This means that theВ potential for profits, or losses, from an initial capital outlay is significantly higher than in traditional trading. The margin required is typically between 1% and 10% of the total value of your position, depending on the market.

Just like other forms of trading, including traditional share dealing, two prices are quoted for all spread bets – a buy price (the price at which you can go long if you expect the underlying market to rise) and a sell price (the price at which you can go short if you expect the underlying market price to fall). The difference between the ‘buy’ price and ‘sell’ price is known as the spread.

Benefits of Spread BettingВ

The main benefit of spread betting as opposed to conventional forms of trading is that you can trade on both rising and falling markets, giving you the potential to make a profit regardless of whether the markets go up or down. But, there's plenty more to consider. В

В 1. Any profit you make is tax-free*

All profits made in spread betting are exempt from UK Capital Gains Tax*. This automatically saves you from losing a significant percentage of your profits. As spread betting is a derivatives product, it’s also exempt from UK stamp duty. (Tax laws are subject to change and depend on individual circumstances.)

2. You can trade 24 hours a day

You are able to access your account and trade whenever you want, wherever you are, which is important particularly when market prices are moving quickly. The majority of spread betting brokers give you unrestricted access to your account 24 hours a day, 7 days a week.В

Many brokers also run markets 24 hours a day; including major indices such as the UK 100 and Wall Street, which means you can still spread bet when the underlying markets are closed.

3. Use leverage to maximise your profits

As a leveraged product, when you spread bet you only need to deposit a small percentage of the full value of your position - this is known as margin. This means that the potential for profits, or losses, from your initial capital outlay is significantly higher than with traditional trading.В

Margins factors can start from just 40 x stake, depending on the market you’re trading.

4. Profit on both bull and bear markets

Spread betting is one of the few forms of financial trading that enables you to profit from falling market prices. So you can gain exposure to market movements regardless of the direction in which the markets are moving.

For example, if you think the markets are going to rise, you go long on the price (buy). Your profits will rise in line with any increase in that price (and your losses will increase in line with any fall in price).

If, on the other hand, you think the markets will fall you go short on the price (sell). Your profits will rise in line with any fall on that price (and your losses will increase with any rise in price).В

5. Trade on a huge range of markets

With spread betting, you can not only take a position on thousands of individual shares, indices and currencies around the world, but also place trades on sectors, commodities, bonds and interest rates.В For example, this means you are able to trade on gold spot price, as well as other gold derivatives such as futures, mining companies, ETFs etc.

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