A guide to spread betting for traders

Learn all about spread betting, its potential benefits, and why Capital.com is the right place to open your spread betting account.

What is spread betting? 

Spread betting is one of the most popular ways to trade derivatives in the UK. It involves speculating on the price movements of an underlying asset, such as a stock or commodity, without physically owning it. It enables you to trade with leverage, meaning you can control large positions with a relatively small amount of capital, which increases both profits and losses. As a form of trading financial derivatives, spread betting is a potential alternative to CFD trading. 

When you spread bet, you take a position on a market that’s either rising or falling (known as going long or short), and stake a chosen amount of money for every point the market moves. Your profit or loss figure is dependent on whether the price moves for or against your position between opening and closing the trade.

The key features of spread betting

There are a number of features that define the process of spread betting as a financial derivative. Here are a few of the main ones. 

Trading on margin

Like CFD trading, spread betting enables you to trade on margin, also known as trading with leverage. This means you only have to put down a fraction of the trade’s value, with the rest effectively loaned to you by the broker. It also means you require less funds than you’d need if you were trading the underlying asset itself. Margin percentages may vary according to the asset class you’re trading. For example, trading an index may require a margin of 5%, while the margin for forex pairs can be as low as 3.33%. 

Trading on margin means you have the potential for larger profits than your initial outlay. However, it can also amplify losses, so it’s important to use it with caution and have a solid risk-management plan in place.

Going long or short

Having the choice of going long or short is another key benefit of spread betting, as it is with CFDs. For example, if you are spread betting on shares, you can speculate on a stock’s price falling as well as rising. If you were buying a physical stock through a traditional stockbroker however, you wouldn’t be able to do this. 

Localised tax benefits

Also, spread betting offers tax benefits in some countries. In the UK, for example, spread betting is usually exempt from capital gains tax and stamp duty,* but you should always check with a tax specialist if this is the case for you. Losses incurred through spread betting cannot be offset against other capital gains, unlike with CFDs. 

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Trading per point

Finally, the ability to trade per point with spread betting can be a draw for some traders who may prefer this format to trading contracts using CFDs.

Costs involved in spread betting

For every spread bet you make, you’ll pay a fee based on something called the spread. That’s the difference between the buy and sell price of a market, and the way brokers like us make money from our service. You may also pay additional fees, for example if you use a guaranteed stop-loss* or if you hold a trade overnight. As with all Capital.com instruments, you won’t pay any commission when you spread bet.

Here’s the buy and sell price of an asset visualised, showing the spread from which our fee is derived. The size of the spread can vary depending on the asset, based on factors such as market liquidity and volatility, meaning that your cost of trading can also vary in kind. It’s advisable always to make sure you’re aware of the cost of trading before you open a position. You can do this via our charges and fees page.

*Stop-losses may not be guaranteed.

How to spread bet

It’s easy to learn spread betting basics with Capital.com. Once you sign up and your account has been approved, you may want to practise spread betting with our user-friendly demo account. Also, it can be helpful to research a range of markets to get a feel for the fundamental and technical drivers of their prices. When you’re ready to start with live money, here’s what to do.

  • 1. Choose a market to trade, based on your trading goals
  • 2. Decide on your trade size
  • 3. Consider applying a stop-loss to manage risk
  • 4. Open your position long or short
  • 5. Manage your position, monitoring fundamental and/or technical drivers
  • 6. Close your position

Spread betting examples


Spread betting benefits with Capital.com

At Capital.com, we’re proud to have won the ‘Best Spread Betting Platform’ award at the ADVFN International Financial Awards 2022. We were also shortlisted for the ‘Best Spread Betting Provider’ award at the Investors’ Chronicle 2023 Investment Awards.

Here’s why our spread betting service is so acclaimed by some of the leading authorities in the trading world.

  • A comprehensive range of 2,900+ spread betting markets across commodities, indices, shares and forex
  • No stamp duty or capital gains tax*
  • Rapid withdrawals**
  • Clear, easily-navigable trading platform, helping you spread bet with all the tools you need, when you need them

So why not join our 84,000+ spread bettor clients and take a position with us today. 

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

**98% of withdrawals are processed within 24 hours, according to our internal server data from 2022.


How does spread betting work?

Spread betting works by allowing traders to speculate on a range of underlying financial markets using leverage, with the intention of making a profit. It’s popular because it allows you to open both long and short positions, as well as providing tax benefits in certain countries. 

Through spread betting, you can take a position on instruments ranging from stocks like Tesla, to commodities like gold, while taking full control of the amount you stake per point of market movement.

What is the spread in spread betting?

For every trade you make with us, you’ll pay a spread, which is how we make money as a broker. On each market, the buy price is the price at which you can enter a long (buy) position, and it’s the highest price at which a market maker or broker is willing to sell the financial instrument to you. The short price is the price at which you can enter a short (sell) position, and it’s the lowest price at which a market maker or broker is willing to buy the financial instrument from you.

The difference between these two prices is the spread. For example, if the buy price for a stock is £100 and the sell price is £99, the spread is £1. You’ll pay the spread on both opening and closing the trade.

Is spread betting risky?

Like all forms of derivatives trading, spread betting is inherently risky. It involves trading on leverage, which means you’re controlling a larger position than your initial deposit. Therefore, while your profits can exceed your deposit if the market goes in your favour, your losses can too if the market goes against you.

As with all derivatives, you need to fully understand the risks of spread betting before opening a live spread betting account. You may want to open a demo account first to practise trading risk-free and familiarise yourself with our user-friendly platform. Also, it’s advisable to check out our range of educational resources to boost your trading knowledge and confidence.

What’s the difference between spread betting and CFDs?

There are a few differences between spread betting and CFDs. With CFDs, your position is structured as a financial contract, with the option to trade whole contracts or fractions of them. With spread betting however, you’re staking a unit of currency per point of market movement.

There are also tax differences to consider. With spread betting, you’ll usually be exempt from capital gains tax and stamp duty in the UK,* while CFDs don’t have such exemptions.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Is spread betting legal in the UK?

While spread betting is restricted, limited or prohibited in certain countries globally, spread betting is legal in the UK, where it’s regulated by the Financial Conduct Authority (FCA). The FCA oversees the spread betting industry to ensure that it operates in a fair and transparent manner and that customers are protected.

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