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Risk Warning
Spread betting allows you to place bets on whether a market will rise or fall. You can place these bets on many financial markets, including global stock markets and indices, FOREX, commodities, interest rates, futures, options and bonds. Spread betting is a derivative product, which means you do not actually purchase the asset itself, instead you place your wager on the movement of the asset’s price.
If your prediction about whether the asset will go up or down is correct then your profit will be your initial stake multiplied by each point that the market moved in your favour. However, if you are incorrect, you lose the initial stake multiplied by each point the market moved against you.
In other words, the bigger the market move, the bigger your profit – or your loss.
You don’t have to pay capital gains tax or income tax on your profits (although tax treatment depends on individual circumstances and tax laws are subject to change). You also don’t have to pay stamp duty as you do with traditional share purchases. The spread betting company won’t charge you a commission or a fee (they make their profits on bets that you lose).
Spread bets are a leveraged product, which means you can make a relatively small outlay to gain a large position, and if you win this maximises your profits. But if you lose it also maximises your losses.
Spread betting is a very risky kind of trading. As with all kinds of gambling, you should never bet more than you can afford to lose.
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