Spread betting

Financial spread betting lets you take a position on whether a market will rise or fall by staking a sum per point of movement. If you "buy" at £10 a point and the market rises 30 points, you gain £300; if it falls 30 points, you lose £300. It is economically very similar to a CFD: both are leveraged derivatives, both require margin, and losses can exceed the amount you expected to risk if the market moves sharply.

Spread betting is mainly offered in the UK and Ireland. In the UK it is regulated by the FCA, and retail clients get the same protections that apply to CFDs, including leverage limits and negative balance protection.

Example

Illustrative figures: an index is quoted at 8,000 / 8,001. You buy at 8,001 for £5 a point.

• The index rises to a bid of 8,050. Closing gives 8,050 − 8,001 = 49 points × £5 = £245.
• If it instead falls to 7,950, closing gives −51 points × £5 = −£255.
• If the margin requirement is 5% of the position, the exposure is 8,001 × £5 = £40,005 and the margin is about £2,000.

In forex, a "point" is usually one pip, so £1 a point on GBP/USD moves £1 for each 0.0001 change.

Things to know

• Costs are mainly the spread, plus overnight financing for positions held past the daily cut-off. Contracts with a fixed expiry date usually have wider spreads instead of daily financing.
• Tax treatment depends on individual circumstances and can change. It is a matter to check with a qualified adviser, not a reason to choose the product.
• The point value matters. As with contract size, what one point means differs between markets.

Our guides to what a CFD is and why most retail CFD traders lose apply closely to spread bets as well.