1. Tax Free
Unlike traditional share dealing, you pay no taxes on your profits. They are not considered profits under tax laws, but a winning bet, and as such Capital Gains Tax does not apply. The transactions also involve no stamp duty, as the underlying share or commodity is never actually purchased – it’s just a gamble on whether or not the value will rise or fall.
2. No fees or commission
Spread-betting companies don’t charge commissions or brokers fees. They include all costs in their spread
3. Profit from rising or falling markets
One of the biggest advantages of spread betting is that it doesn’t matter in which direction the market is going – you can still make money. A profit can be made in a falling market as well as in a rising one.
4. Trade on Margin
Spread betting is leveraged, which means you only need to bet a small percentage of the value of your trades. You can make the bet using a fraction of the money it would require if you wanted to buy the actual shares from a stockbroker. This is also known as gearing. You can also choose the size of your stake, often much smaller than would be the case if you were speculating on the underlying market.
5. Easy to Understand
While some jargon is employed, the terms and calculations are not as complex as in options and future tradings. Our handy glossary will help you figure out some of the more difficult-to-understand terms.
6. Wide Range of Markets
You can access thousands of markets from one account, and one trading browser including stock Indices, currency, commodities, shares or even, in some cases, house prices.
7. 24 hour access
Some spread betting companies are open 24 hours a day from Sunday night to Friday night. This allows trading in hours even when underlying markets are closed. Dealing can be done online or by phone. Some employ trading platforms compatible with your mobile phone or smartphone, so you can trade whenever or wherever is convenient for you.
8. Control your losses
You can set limits on the losses you are prepared to take. These are known as Stop Losses, or Limit Orders. They offer protection against massive losses if the market moves against you. Find out more
Spread-betting can be used as a hedging tool to offset against losses in your other portfolio. For example, if you own shares which are decreasing in value in the short term, you can bet on the value falling, and make a profit to offset against the loss in value of the shares you hold. Many investors use spread-betting to hedge against losses.
10. Regulated Industry
The spread betting industry is tightly regulated. In the UK, this is by the Financial Services Authority (FSA). It means strict rules apply and the firms offering it are secure and safe.