Spread Betting is an exciting way of trading the world’s markets without having to physically own the asset, such as a share or commodity. You are essentially betting on the movement in the price of the underlying asset.

If you think the price of a financial instrument, say BP shares or Gold Bullion, is going to increase in price, you would buy the price quoted by Spread Co. If you think that a share or index is going to fall in value you would sell the price quoted by Spread Co. That is one of the advantages of spread betting – you can sell something ‘short’ – that is, bet on a fall in the price of a financial instrument, even if you don’t own it.

Spread betting with Spread Co allows you to do this simply and efficiently from one online trading account. Our aim is to make your trading experience fast and cost effective and to support you in all your trading goals.

What is a Spread?

The spread, also known as “the dealing spread” or “the buy / sell spread,” is the difference between the prices at which you can buy and sell financial instruments such as indices, equities, commodities or FX pairs.

For example:
If Spread Co is quoting the UK100 at 5001 - 5001.8, the lower figure (5001) is the sell price and the higher figure (5001.8) is the buy price. This means that you can sell the UK100 at 5001 and buy at 5001.8. The spread in this example is 0.8.

The spread is how market makers such as Spread Co are compensated for creating a market for you to trade. A wide or large spread is more expensive to you. A narrow or small spread is cheaper to you – Spread Co offers some of the lowest spreads in the market, meaning you can make your money go further with Spread Co. To find out the best way to get started in spread betting, click here.

How Does it Work?

When you spread bet you are betting on the movement in the instrument you want to trade – you think it will go up in price or down in price.

An example: You are looking at the FTSE 100 and think that at 5,000 it is worth buying - you think that the FTSE 100 is going to increase in price in the coming hours, days or weeks. So you buy the UK100 Index, (which is our market which replicates the movements of the FTSE 100) at 5001. Then for every one point increase in the UK100 you will gain 1x your stake. How much you stake is up to you, but for example, say you staked £5 per point at 5,001, and the UK100 climbs to 5,101, you would win the difference times your stake. In this example the result would be (5,101 – 5,001) x £5 or 100 x £5 = £500. You have to close your trade at this level though, because if you don’t and it falls back to 5,001, you are back to zero.

Of course, everyone knows that spread betting carries risks – the risk here is that the FTSE 100 starts to fall instead of rising after you buy it – if the FTSE fell to 4,951 before you closed your position, you would lose 50pts or £250. Setting stop losses can help control this risk though, you can set the maximum amount that you are prepared to lose and the stop loss will offer some protection against unexpected losses.

To see more spread betting examples, including setting stop losses click here.