Should I Spread Bet
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Should I Spread Bet
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. High volatility increases the risk of sudden, large or rapid losses.
To prioritise the service we give our existing clients, IG is not currently allowing any new positions on GameStop and AMC Entertainment.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. High volatility increases the risk of sudden, large or rapid losses.
To prioritise the service we give our existing clients, IG is not currently allowing any new positions on GameStop and AMC Entertainment.
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Spread bet to speculate on rising and falling market prices. Learn how to spread bet in six steps – covering everything from opening an account to making your first trade.
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Spread betting is a way to speculate on the future direction of a market’s price. If you expect an asset’s price to rise, you’d open a position to ‘buy’ and if you expect an asset’s price to fall, you’d opt to ‘sell’.
When you spread bet, you’ll be putting up a certain amount of capital per point of movement in the underlying market. Your profit and loss would then be multiplied by this amount to get your final sum.
For example, you thought a stock was going to increase in price so you opened a spread bet for £10 per point. If the stock increases in price by 10 points, you’d have made £100 (10 x 10), but if it decreased by 5 points, you’d lose £50 (50 x 100).
Spread betting is also leveraged, which means you’ll only need to put down a small initial deposit to open a trade. Your end total is then calculated using your full exposure – meaning your profits and losses could be magnified.
Open a live account via our online form – you could be ready to trade in minutes, and there’s no obligation to add funds until you want to place a trade.
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A trading plan outlines your motivation, time commitment, goals, attitude to risk, available capital, markets to trade and preferred strategies. Creating one is particularly important if you’re new to the markets as it can help you take the emotion out of your decision making. It will also provide some structure for when you open and close your positions.
Once you're logged in to our platform or app, you can choose from 17,000 markets, including:
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Start spread betting on our award-winning suite of platforms, including:
These can all be tailored to suit your trading style and preferences, with personalised alerts, interactive charts and risk management tools.
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When you open your platform, you’ll be able to search for a market in the top left corner or browse through each asset class.
After you’ve opened the deal ticket for your chosen market, you’ll need to choose whether to buy or sell the market – depending on whether you think the asset will rise or fall in price. You’ll also need to decide on your bet size, which will determine the margin you pay.
Finally, before you enter the market, it’s important to consider how you’ll manage your risk . Attaching stops or limits to your position will automatically close your trade once it hits a certain level – a stop-loss order can minimise your potential loss, while a limit-close order can help lock in any profits.
Once you’re ready, it’s time to open your trade. You can then monitor the profit or loss of your position in the ‘open positions’ section of the dealing platform.
When you decide it’s time to close your position, you just click ‘close’ to realise your profit or loss.
Whichever market you’re interested in, it’s important to understand how much capital you’re putting at risk. For spread betting, the calculation for this is:
Capital at risk = bet size x market price (in points)
When you spread bet, the market price will be displayed in points. For example, if you were trading a forex pair, instead of a price of ‘1.12980’ you would see a price of ‘11298.0’. So, a trade worth £10 per point of movement, would mean you’re putting a total of £112,980 at risk (11298.0 x 10).
As spread betting is a leveraged product, you will only need to cover the margin as opposed to the full value of the trade. The spread betting calculation for margin is:
Margin = margin factor x total exposure.
For the above example, if the margin factor was 3.33%, you would only have to put down £3762.23 (3.33% x £112,980) to open the trade. Leverage could potentially magnify your profit and loss, as they’re calculated using the full size of your trade – in this case, £112,980 – not just the margin.
You decide to spread bet on Barclays stock, which is currently trading at 150.25. If there was a one-point spread, you would be presented with a buy price of 150.75 and a sell price of 149.75.
You open a long spread bet position on Barclays, buying at £10 per point of movement at 150.75. If Barclays shares had a margin requirement of 20%, you’d need to deposit £301.50 (£10 x 150.75 x 20%).
Let’s say Barclays shares increased to 170.75, you might decide to close your position to take your profit.
You’d close the spread bet position at the new sell price of 170.25. As the market has moved in your favour by 19.5 points (170.25 - 150.75), your profit would be £195 (19.5 x £10). You won’t pay any tax on your profits. However, you would have to pay funding charges to keep your position open overnight.
However, let’s say shares of Barclays fell instead, down to 130.25, there would be a new sell price of 129.75. As the market has moved against you by 21 points (129.75 - 150.75), you’d be looking at a loss of £210 (210 x £10), plus any additional funding charges.
You decide to spread bet on forex on EUR/USD, which is trading at £1.19129. You think that the dollar is going to rise against the euro, so you decide to sell the currency pair.
As spread betting markets are listed in points, when you enter the platform you would see a market price of 11912.9. And, because of the spread, you would see a sell price of 11912.6 and a buy price of 11913.2.
You open the trade for £15 per point at 11912.6 and as EUR/USD has a margin factor of 3.33%, you’d need to deposit £5950.35 (£15 x 11912.6 x 3.33%).
Say EUR/USD fell to 11890.1, with a buy price of 11890.4 and a sell price of 11889.8. As the market has moved by 22.2 points (11912.6 - 11890.4), you’d have a total profit of £333 (£15 x 22.2). Remember, if you’d kept this position open overnight then your total profit would be lower because of funding charges.
However, let’s say EUR/USD rises instead. So, you’d close your position at the new buy price of 11936.0. As the price has moved against you by 23.4 points (11912.6 - 11936.0), you would have made a loss of £351 (£15 x 23.4), plus any funding charges.
You want to spread bet on the FTSE 100, which has an underlying market value of 7114. We’ll apply a one-point spread, so you can sell it at 7113.5 or buy at 7114.5.
As you anticipate that the FTSE 100 is going to rise, you opt to buy at £10 per point at 7114.5. The FTSE 100 has a margin factor of 5%, you’d only need to deposit £3557.30 (£10 x 7114.5 x 5%).
Let’s say your prediction is correct and the FTSE 100 increases in value. You close your position when the market reaches 7150 – at the new sell price of 7149.5.
As the market moved in you favour by 35 points (7149.5 – 7114.5), your profit would be calculated by multiplying this figure by the amount you’ve bet per point. This gives you a profit of £350 (£10 x 35) minus any funding costs.
However, let’s say the FTSE declined in price, instead of rallying. So, you decide to cut your losses when it hits 7078 – with a sell price of 7077.5.
The market has moved against you by 37 points (7077.5 - 7114.5), giving you a loss of £370 (£10 x 37), plus any overnight funding charges if the position was open for more than one day.
You decide to spread bet on gold, which is currently trading at 1315.70, with a buy price of 1316.00 and a sell price of 1315.40. As you believe the price of gold is due to decline, you open a spread bet to sell the commodity for £30 per point of movement.
Gold has a margin factor of 5%, so you would need to put down £1973.10 (£30 x 1315.40 x 5%) to open the position.
Let’s say the price of gold did fall, down to a new price of 1300.10. You close your position at the new buy price of 1300.40.
As the market has moved in your favour by 15 points (1315.40 - 1300.40), you would be taking a profit of £450 (15 x £30). If you had kept your position open overnight, you would also have funding charges to pay.
However, if you were incorrect and the market price of gold rose instead, to 1335.70, you would have made a loss. You’d close your position, at the new buy price of 1335.40.
As the market has moved against you by 20 points (1315.40 - 1335.40), your total loss for the commodity spread bet would be £600 (20 x £30), plus any funding charges.
If you’re a retail trader, you can spread bet on over 17,000 markets including forex, shares, indices and commodities. Professional traders are also able to spread bet on cryptocurrency markets, but trading crypto derivatives isn’t available to retail traders.
Spread betting is available to anyone who has sufficient knowledge and experience of trading. This will be assessed during the application process for an account with us.
Spread betting can be a useful tool for anyone who wants a range of asset classes, tax-free trading, and the opportunity to speculate on markets that are rising and falling in price. However, if you don’t feel ready to start trading live markets, you can start by building your knowledge with IG Academy’s range of online courses, or trading in a risk-free environment with an IG demo account .
The cost of spread betting depends on the bet size that you choose, how much capital you are willing to put up, and how long you keep your trade open for. Before you start to spread bet, it is important to establish what your parameters for trading are, and how much capital you can afford to risk.
Find out more about IG’s spread betting charges .
To open a new spread betting account with us, you just need to fill out a simple form so that we can establish your previous experience and available funds. This way we can ensure that you get the best trading experience possible.
Our mobile trading apps, state-of-the-art technology and free educational tools make the process of switching your account to us an effortless experience. So, you can be signed up and ready to trade within minutes.
Find out more about spread betting and test yourself with IG Academy’s range of online courses.
Discover the differences between spread betting and CFD trading
Learn about risk management tools including stops and limits
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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.
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Spread betting provides a popular way to go long or short on thousands of financial markets, including indices, shares, currencies, commodities and more. Find out what spread betting is – and how it works – with our handy guide.
In this guide, we’re going to cover all the essentials you need to know about financial spread betting. Scroll down to get started at the beginning, or follow these links to skip to a specific section:
Spread betting is a financial derivative that enables you to trade on the price movements of a wide range of markets. Unlike traditional investing, you don’t take ownership of any assets when spread betting – which means you can go short as well as long, take advantage of leverage and more.
Traders use spread betting to get a range of different benefits. Some, for example, will utilise spread bets to trade when markets are falling as well as rising. Others use them to diversify their exposure by trading FX, shares, indices and commodities 24 hours a day from a single account.
Spread betting works using bets instead of the physical buying and selling of assets. In a traditional Apple trade, for example, you’d buy Apple stock, hold it then sell it. When spread betting, you’d achieve the same result by making a bet that Apple shares will increase in price.
The further that Apple moves in your chosen direction, the more profit you make. The further it moves against you, the greater your loss.
When you open a spread bet, you’ll see two prices listed: the buy price and the sell price. Using this, you can choose whether you want to go long or short. If you think the value of your chosen market will go up, you click buy. If you think it will fall, you click sell.
Then, to close a spread bet, you trade in the opposite direction to when you opened it. So if you bought at the outset, you’d sell to exit – and vice versa.
The spread is the difference between the buy and sell prices listed on a market, and it is how you’ll pay to open a spread betting position. Instead of paying a commission, all the costs to trade are covered in the difference between the buy and sell prices.
The FTSE 100, for instance, might have a spread of 1 point. This means that its buy price will be 0.5 points above its current market price, while its sell price will be 0.5 points lower. Your broker’s fees to open and close your position are all contained within that 1-point spread.
Another key aspect to spread betting is your stake, which is also known as your bet size . Selecting a bet size lets you decide how many pounds per point to allocate to each trade, which dictates how much you’ll make or lose for every point that the market moves.
In UK spread betting, you’ll decide you stake using pounds per point. Say you bet £5 per point that Apple stock will go up. For every point of upward movement, your position will earn you £5. If it drops, then the opposite is true.
If you think that the price of oil is going to go up, then you could place a buy trade with a stake of £2 a point.
This will earn you £2 for every point the price of oil rises. However, should the price of oil fall, you would lose £2 for every point of downward movement.
You realise your profit or loss when you close your position. If oil had moved up 50 points from when you bought it, you would make (50 points x £2) £100. If it had moved down 50 points, you would lose £100.
Leverage is another important aspect of spread betting. It means you can put up a small amount of money to control a much larger amount. When spread betting on stocks, for example, you might only have to put up 20% of the total value of your position. This would mean that the market has a leverage factor of 5:1. Other markets, such as forex, may have leverage of 20:1 or higher.
Bear in mind, though, that leverage will amplify your profits and your losses – so it requires careful risk management.
The deposit that you have to maintain in your account to keep a leveraged trade open is called your margin . When you’re trading with leverage, you’ll need to ensure that you always have sufficient margin in your account.
Say that you want to bet £10 per point on the FTSE 100 when it is trading at 6000, with a leverage factor of 20:1. The total size of your position is (10 x 6000) £60,000, so you’d need to put up (5% of 60,000) £3000 as margin.
Learn more about margin and leverage .
Unlike traditional share dealing, with spread betting you can sell a market if you think it’s going to fall in value. In doing so, you can profit from the falling price. This is known as 'going short'. To short a market, you trade at the sell price instead of the buy.
Tesco is trading at 229. You believe that the company’s share price will fall and decide to go short £5 per point at 229.
Tesco announces that it mistakenly overstated its pre-tax profits for the last six months by £250m. After two weeks, Tesco’s share price has plummeted to 168p as shareholders lose confidence in the retailer. You decide to close your trade at 168p.
Tesco stock has fallen 61 points. Your spread bet earns you £5 for every downward point of movement, so your trade would earn you (61 x 5) £305.
However, if Tesco stock had risen 61 points instead, you would lose £305. It’s also worth noting that this illustrative example does not include overnight financing charges .
When spread betting, it is crucial to maintain appropriate risk management. Typically, this involves identifying the risks that you may face when trading, then creating a risk management plan that sets out how to mitigate them for each position.
Stops are an essential tool to control risk. When you place a stop on an open position, you’re instructing your spread betting provider to automatically exit the trade if it moves a certain amount against you. This limits your risk by setting a maximum loss from any given position.
Learn more about spread betting risks .
A popular product for investors, Financial Spread Betting is a way to actively participate in financial markets.
Spread betting may be ideal for investors who want the opportunity to try and make a better return for their money. However, it comes with significant risks to your capital and is not suitable for everyone. We strongly suggest trading on a demo account before you try spread betting on live markets.
Spread betting is ideal for people who want:
City Index offers a choice of over 4000 spread bet markets, including:
You can try out trading on all these markets with a free demo account .
Spread bets are tax free in the UK. That means you don’t need to pay capital gains tax on any profits you make, unlike traditional share dealing. You also won’t have to pay stamp duty.
However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.
Spread betting and CFDs are both leveraged products that enable you to speculate on the price movements of financial markets. But they work in different ways.
With spread betting, you bet a certain number of pounds per point on the future direction of a market. With CFDs, you trade a contract in which you agree to exchange the difference in asset’s price from when you opened your position to when you close it.
When you spread bet on shares with City Index, we’ll automatically adjust your open positions to reflect dividends.
If you are long on a company that declares a dividend, we'll credit your account. If you are short, you pay the dividend. This happens before the market opens on the ex-dividend date.
Learn more about corporate actions here .
No, forex and spread betting aren’t the same thing. Forex is an asset class, like shares, indices or commodities. In forex trading, you are speculating on the price movements of currency pairs.
You can use spread betting to trade lots of different asset classes – that includes forex, as well as shares, indices, commodities and more.
It depends on your chosen provider. You should decide exactly how much capital you want to risk before you start trading.
At City Index, we recommend that you deposit a minimum of £100, or however much you need to substantially cover the margin requirement of your first trade. It is prudent to also have enough equity in your account to sustain any significant moves against your position.
No. Day trading is an approach to the markets that involves ensuring that all your positions are closed by the end of the day. Spread betting is a type of leveraged financial derivative.
As day traders only keep their positions open for a short amount of time, they often use leverage to amplify their profits and losses. Spread betting is a popular method of achieving this, but it isn’t the same as day trading.
To hedge with spread betting, you open a spread bet that earns you a profit if an existing open position incurs a loss.
For instance, you might own Barclays shares as part of your investment portfolio. If you're worried about a temporary downturn, then you could sell your shares – but then you'd lose your position on the company.
Or instead of selling your shares, you could open a short spread bet on Barclays. Then, if Barclays’ share price does fall, the loss in your portfolio would be offset by the profit from your spread bet.
Want to learn more about spread betting? Explore these free resources to discover everything you need to know.
Alternatively, open a live trading account now – you can get started in less than five minutes.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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