Risk warning: Spread betting, FX and CFD trading carries a high level of risk to your capital and you can lose more than your initial deposit. These trading products may not be suitable for all investors so seek independent advice. View full risk warning
What is Financial Spread Betting?
Financial spread betting is one of many forms of investing and betting the global financial markets, regulated by the UK’s Financial Conduct Authority (FCA). From one betting account you have access to UK, European, US and Asian stocks, indices, currencies, commodities and bonds. Via your account you have the ability to back your judgment as to whether any of our markets will rise or fall in value, similar to buying a share via a traditional stock broker in the hope that it will rise in value, so that you can sell it for a profit at a later date.
With spread betting, you can choose to bet that the market will rise, or alternatively, you can bet that it will fall. If you are correct and the market moves in your favour, you will make a profit of your stake multiplied by each point that the market moves in your favour. If you are wrong you will make a loss of your stake multiplied by each point that the market moves against you.
With financial spread betting you do not actually own the underlying asset that you are betting because it is a derived instrument. The prices that we provide you are derived from the underlying asset and these prices move in conjunction with that underlying asset.
So, for example, if you opened a spread bet on Vodafone’s share price you would not actually own the shares, but you would be buying or selling our price for Vodafone in the expectation of its share price rising or falling. As Vodafone’s underlying share price moves, so does the Capital Spreads quote meaning our derived price moves up and down just like the real share.
The "spread" in the phrase spread betting refers to the Sell (Bid) and Buy (Offer) price quoted by a spread betting company. This price is calculated by adding additional points around the live (or the estimated future) market price of a financial product. For example, if the Daily FTSE is betting at 5000.5 ourquote might be 5000-5001.
One of the problems for spread betting companies is the word 'betting' as this gives a false impression to the marketplace. Spread betting is in fact a highly adaptable betting tool. One of the main benefits of spread betting is that all profits are recognised as the winnings of a bet , and are therefore free of Capital Gains and Income Tax in the UK. Tax law can differ depending on jurisdiction.