Spread betting UK

Spread betting in the UK is a tax-efficient way of profiting from rising or falling global markets. Traders can go long or short on a wide range of markets and can make tax-free profits if they are right in their assessment of market direction.

UK Spread betting companies offer prices on stocks, stock indexes, commodities, currencies and bonds, and most offer betting from as little as 50p per point. For UK residents spread betting is very attractive as it is free of stamp duty and capital gains tax.

UK Spread bettors can take advantage of numerous advantages of this style of trading which includes 24 hour dealing, the ability to go long or short, trade a wide range of markets and take advantage of leverage. Leverage is of course a two-edged sword and although it can work for the trader if he is right it can also work against him if he is wrong. Another big advantage of this style of trading is that it does not require ownership of the financial instrument.

When spread betting, the trader can go long (buy) if he thinks the market in question will rise, or if he thinks the market will fall he can go short (sell). The trader makes profits if the market moves in the direction of his bet and loses if the market moves against him. Profits and losses are calculated by multiplying the trader's initial stake by the number of points that the market has moved for or against him.

Spread betting is a leveraged product and because of this the trader is only required to deposit a small percentage of the value of his position, known as margin. Margin requirements vary from market to market but are usually between 1% and 10% of the total value of the position. Many spread betting firms offer currency spread bets with margin rates from only 1%. The potential for profits is therefore significantly higher than it is for traditional trading, although as mentioned above this can also work against the trader.

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