Spread Betting FAQs

Spread betting is a financial derivative that allows traders to speculate on the price movements of various financial instruments such as equities, commodities, currencies, and indices without actually owning the underlying asset. Instead, traders place a bet on whether the price of the underlying asset will go up or down, and the profit or loss is determined by the accuracy of their prediction.

With spread betting, traders place a bet on the spread or the difference between the bid (sell) and ask (buy) price of the underlying asset. The spread is the commission charged by the broker for executing the trade, and it represents the trader’s transaction cost. If the trader thinks the price of the underlying asset will rise, they will buy at the ask price, and if they think the price will fall, they will sell at the bid price.

Spread betting offers traders several advantages, including leverage, potential tax benefits, and the ability to trade in both rising and falling markets. However, it is also a high-risk trading strategy that requires a sound understanding of the financial markets, a disciplined trading plan, and effective risk management.

Spread betting offers several advantages to traders, including:

Leverage: Spread betting allows traders to magnify their profits and losses by trading on margin. This means that traders can take a position in the market with a fraction of the total trade value, thus increasing their potential returns. However, it is important to note that leverage can also amplify losses.

Tax-free profits: In some countries, like the UK, spread betting profits are tax-free. This may be a significant advantage for traders, as they can keep more of their profits and reinvest them in the market.

Access to a wide range of markets: Spread betting provides traders with access to a wide range of markets, including equities, commodities, currencies, and indices in one account. This allows traders to diversify their portfolio and take advantage of different trading opportunities, through one account.

Trading flexibility: Spread betting allows traders to take both long and short positions, meaning they can profit from both rising and falling markets. This flexibility allows traders to take advantage of short-term market fluctuations and adapt to changing market conditions.

Overall, spread betting can be a useful tool for traders who are looking for a flexible and potentially tax-efficient way to access a wide range of markets and potentially magnify their profits. However, it is important to understand the risks involved and to trade responsibly.

Spread betting can be a high-risk trading strategy, and it is important for traders to understand the risks involved. Some of the main risks of spread betting include:

Leverage: As mentioned earlier, spread betting allows traders to trade on margin, which can increase their potential returns. However, it can also magnify their losses, and traders can quickly lose more than their initial investment.

Market volatility: Financial markets can be volatile and unpredictable, and this can increase the risks of spread betting. Traders may find themselves in a losing position if the market moves against them, and sudden price movements can result in significant losses.

Margin calls: If the trader’s losses exceed their available margin, they may be subject to a margin call. This means they will be required to deposit additional funds to cover their losses, or the broker may close their position.

Lack of control over the underlying asset: In spread betting, traders do not own the underlying asset, and they have no control over the factors that can affect its price. This can make it difficult to make informed trading decisions and increase the risks of losses.

Psychological factors: Spread betting can be a stressful and emotionally challenging trading strategy, and traders may be susceptible to making impulsive or irrational decisions. This can result in significant losses and make it difficult to maintain a disciplined trading plan.

Overall, spread betting can be a high-risk trading strategy, and it is important for traders to have a sound understanding of the financial markets, a disciplined trading plan, and effective risk management strategies to minimize their exposure to risk.

Spread betting is a financial derivative that allows traders to speculate on the price movements of various financial instruments without actually owning the underlying asset. Instead, traders place a bet on whether the price of the underlying asset will go up or down, and the profit or loss is determined by the accuracy of their prediction.
To place a spread bet, traders first need to choose the underlying asset they want to trade and decide whether they want to go long (buy) or short (sell). Once they have made this decision, they need to select the stake size, which represents the amount they want to bet per point of movement in the underlying asset’s price.

The next step is to choose the spread, which represents the difference between the buy and sell price of the underlying asset. The spread is typically offered by the spread betting provider, and it can vary depending on market conditions and other factors.

If the trader believes the price of the underlying asset will rise, they will place a long (buy) bet at the higher ask price. If they believe the price will fall, they will place a short (sell) bet at the lower bid price. The profit or loss is then calculated based on the difference between the opening and closing prices, multiplied by the stake size.

For example, if a trader bets £5 per point on a long position on ABC equity, and the price of the equity rises by 10 points, they would make a profit of £50 (10 points x £5 stake size). However, if the price of the equity falls by 10 points, they would incur a loss of £50 (10 points x £5 stake size), less spread or transaction costs.

It is important to note that spread betting involves significant risks, including the potential to lose more than the initial investment. Traders should have a sound understanding of the financial markets and a disciplined trading plan to minimize their exposure to risk.

Spread betting can be an attractive option for traders looking for a flexible and potentially tax-efficient way to speculate on financial markets. However, spread betting involves a high degree of risk, as it is a leveraged product, which means that traders can potentially lose more than their initial deposit.

Before engaging in spread betting, it is essential to understand the mechanics of the product, such as the risks involved, the fees and commissions charged, and the tax implications. Traders should also have a solid understanding of the markets they wish to trade, including the factors that can affect prices, such as economic indicators, geopolitical events, and market sentiment.

It is always advisable to seek the guidance of a qualified financial advisor before engaging in spread betting or any other form of investment, to ensure that it aligns with your investment objectives and financial situation.

In spread betting, “going long” and “going short” refer to the direction of a trader’s bet on the price movement of an underlying asset.

When a trader “goes long”, they are betting that the price of the underlying asset will increase. They do this by buying the underlying asset at the current market price, with the expectation that they will be able to sell it later at a higher price and make a profit.

For example, if a trader goes long on a equity at £10 per share price and the price of the equity rises to £12 per share, they can sell the equity for a profit of £2 per share, minus any applicable spread or trading fees. If however, the price of the equity fell to £ 8 per share, they would incur a loss of £2 per share, plus any applicable spread or trading fees.

On the other hand, when a trader “goes short”, they are betting that the price of the underlying asset will decrease. They do this by selling the underlying asset at the current market price, with the expectation that they will be able to buy it back later at a lower price and make a profit.

For example, if a trader goes short on a equity at £10 per share and the price of the equity falls to £8 per share, they can buy the equity back at the lower price and make a profit of £2 per share, minus any applicable spread or trading fees. If however, the price of the equity rises to £12 per share, they would incur a loss of £2 per share, plus any applicable spread or trading fees.

In spread betting, traders can go long or short on a wide range of financial instruments, including equities, commodities, currencies, and indices in one account. It is important to note that spread betting involves significant risks, including the potential to lose more than the initial investment. Traders should have a sound understanding of the financial markets and a disciplined trading plan to minimize their exposure to risk.

In spread betting, traders can also use leverage to magnify their potential profits or losses. It is important to note that spread betting involves a high degree of risk and can result in losses that exceed the trader’s initial deposit. Therefore, traders should have a solid understanding of the markets they wish to trade and implement risk management strategies, such as setting stop-loss orders, to limit their exposure.

Leverage is a key feature of spread betting, and it allows traders to control a large position with a relatively small amount of capital. In spread betting, leverage works by allowing traders to trade on margin, which means that they only need to deposit a fraction of the total value of the underlying asset they want to trade.

For example, if the margin requirement for a particular spread bet is 5%, a trader would only need to deposit £50 for every £1,000 worth of the underlying asset they want to trade. This means that they can control a position worth £1,000 with only £50 of their own capital.

Leverage can increase a trader’s potential returns, as any profits made are based on the full value of the position, rather than just the amount of capital invested. However, leverage can also magnify losses, as any losses are based on the full value of the position.

It is important for traders to use leverage with caution and to have a sound understanding of the financial markets and effective risk management strategies. They should also be aware of the potential risks and be prepared to deposit additional funds if the market moves against them to avoid a margin call.

The benefits of leverage in spread betting are as follows:

Increased market exposure: Leverage allows traders to take larger positions in the market with a smaller amount of capital. This means that traders can access markets that they may not have been able to before due to capital constraints.

Enhanced profit potential: With leverage, traders can make a profit on a larger position than they would have been able to without it. This is because leverage amplifies the size of any gains made on the position. However, with the enhanced profit potential, the risk of losses is also magnified.

Lower transaction costs: With leverage, traders can access a larger position without having to pay the full cost of the underlying asset. This may result in lower transaction costs, making spread betting more affordable for traders.

Flexibility: Leverage allows traders to be more flexible in their trading strategies. They can use leverage to take advantage of short-term market movements or to hold positions for longer periods of time.

However, it’s important to note that leverage also comes with risks, and traders must be careful not to over-leverage their trades. Over-leveraging can magnify losses and result in significant losses. Therefore, it’s essential to use leverage responsibly and always have a risk management plan in place.

Investing directly in an asset, such as a company share, lets you enjoy the full benefit of any rise in the asset’s value. It’s the same with spread betting but you don’t have to make the same, possibly large, initial outlay to access this potential benefit. This is known as using leverage. Leverage magnifies your potential return – you can make the same profit as a share owner with much lower capital outlay compared with purchasing shares. You should remember that potential losses can be greater than your initial outlay if the asset price doesn’t move in the direction you anticipated.
Leverage varies per instrument. Please visit our market information to view the leverage we offer. 

Spread betting can be used to trade a wide range of assets, including equities, commodities, currencies, and indices. Please click here to see Spread Co’s range of markets.

Please click here to see our spreads

Trading in most modern investment products involves some sort of commission or management fee — this could be stockbroker fees or fund management charges. High charges will have a greater impact on your profit potential.

At Spread Co we charge commission when you trade equities. Our commissions are low, starting at just 0.05% for UK equities and are included in our spreads.

All other markets are traded on fixed spreads. (Max stake £50 per point)

When you trade equities with Spread Co, the commission is included in the spread. We take the market price for the equity and deduct our commission from the bid price and add it to the offer price. This has the effect of widening the market spread.

“Here’s an example:

Sell: 180.00 — Buy: 180.10
So the market spread is 0.10 (180.10 — 180)

Our commission would be 0.05%. This is deducted from the bid:
180.00 — (180.00 x 0.05%) = 179.91

And added to the offer:
180.10 + (180.10 x 0.05%) = 180.19

So the trading bid-offer price would be:
179.91 — 180.19

Our spread, including commission in this example is 0.28 (180.19 — 179.91)”

The minimum bet size is £1 per point.
A few Major markets are offered as Mini market for example Mini UK100, Mini US30, Mini EURUSD, for these markets the pip movement is 10 pence, whereas the UK100 is a minimum bet of £1 per point.
Please refer to our market information here.

While spread betting can offer investors the chance to potentially earn higher returns, it also carries significant risks to their invested capital and may not be appropriate for everyone. As a precaution, we strongly recommend practicing on our demo account before engaging in live spread betting.

Unfortunately, we do not offer guaranteed stop losses

Financing charges, also known as overnight funding charges, are fees that traders may be charged for holding bets overnight. These charges are applied to positions that are held beyond the end of the trading day, and are typically calculated based on the size of the position and the interest rate of the underlying asset. 

When a trader holds a long position overnight, they are effectively borrowing money to finance their position. As a result, they may be charged a financing fee based on the interest rate of the underlying asset. On the other hand, if a trader holds a short position overnight, they may receive a financing credit based on the interest rate.

Financing charges can add up over time, and can significantly impact a trader’s profit and loss on a position. It’s important for traders to be aware of these charges and to factor them into their trading strategies.

We offer 0% financing on short cash index & equity positions. When you go short with a Spread bet on a cash index or equity position overnight, you won’t pay a penny more with Spread Co. Financing costs for futures contracts are already built into the quoted price and for all other products, we try to keep our charges as competitive as possible. These are subject to daily corporate actions as ex-dividend dates are set and adjusted to the amount of dividend points.

Spread bets typically do not have an expiration date, unlike some other types of financial instruments such as options or futures contracts. As long as the position remains open and the trader has sufficient funds to maintain the position, it can be held for a maximum of three years.
However, it’s important to note that Spread bets are subject to overnight financing charges if they are held overnight.
It’s also worth noting that some contracts that are designed to expire on a specific date or at the end of a specific period. Spread bets which are dated are subject to a forward rollover to the next contract, e.g. US30 Jun to US30 Sep. For further information please see our cost of charges page.

Positions are marked-to-market daily against appropriate bid/offer on bets which are open, the profit or loss is credited or debited from your balance for the position closing price. Any profit or loss created from the following business day is either credited or debited from the account untill the position is closed.

In spread betting, traders can make profits or losses based on the difference between the opening and closing prices of a trade.

If a trader goes long (buys) an underlying asset, they will profit if the price of the asset rises above the entry price. The amount of profit will depend on the difference between the entry price and the closing price, multiplied by the stake (the amount bet per point). For example, if a trader buys 10 pounds per point of a equity and the price rises by 20 points, the trader will make a profit of 200 pounds (20 points x 10 pounds per point), less any associated costs for spread and transactions costs.

On the other hand, if the price of the asset falls below the entry price, the trader will incur losses, which will also depend on the difference between the entry price and the closing price, multiplied by the stake. For example, if a trader buys 10 pounds per point of a equity and the price falls by 20 points, the trader will incur a loss of 200 pounds (20 points x 10 pounds per point), plus any associated costs for spread and transactions costs.

If a trader goes short (sells) an underlying asset, they will profit if the price of the asset falls below the entry price. The amount of profit will depend on the difference between the entry price and the closing price, multiplied by the stake. For example, if a trader sells 10 pounds per point of a equity and the price falls by 20 points, the trader will make a profit of 200 pounds (20 points x 10 pounds per point), plus any associated costs for spread and transactions costs.

However, if the price of the asset rises above the entry price, the trader will incur losses, which will also depend on the difference between the entry price and the closing price, multiplied by the stake. For example, if a trader sells 10 pounds per point of a equity and the price rises by 20 points, the trader will incur a loss of 200 pounds (20 points x 10 pounds per point).
It’s important to note that spread betting involves a high degree of risk and can result in losses that exceed the trader’s initial deposit. Therefore, traders should have a solid understanding of the markets they wish to trade and implement risk management strategies, such as setting stop-loss orders, to limit their exposure.

You may hold on to your bets for as long as you like as long as you have sufficient margin requirement for it (provided your trade is not liquidated). This is subject to a maximum period of three years.

Corporate actions refer to significant events that occur in a publicly traded company that may affect its equity price, ownership structure, or corporate governance. These actions are initiated by the company’s management and board of directors, and they are subject to regulatory oversight by relevant authorities in the country where the company is based.

Some common examples of corporate actions include:

Dividends: A dividend is a payment made by a company to its shareholders out of its profits or reserves. Dividends can be paid in the form of cash or equity and are usually announced on a regular basis, such as quarterly or annually.

Stock splits: A stock split is a corporate action in which a company increases the number of its outstanding shares by issuing more shares to its existing shareholders. This is done to make the shares more affordable to individual investors and to increase the liquidity of the equity.

Mergers and acquisitions: A merger occurs when two companies combine to form a new entity, while an acquisition involves one company buying another. These corporate actions can have a significant impact on the equity price of the companies involved, as well as on their respective industries.

Rights issues: A rights issue is a corporate action in which a company offers its existing shareholders the right to purchase additional shares of equity at a discounted price. This is done to raise capital for the company and to give existing shareholders the opportunity to increase their ownership stake.

Spin-offs: A spin-off is a corporate action in which a company separates a part of its business into a new, independent company. This is done to allow the company to focus on its core business, while also creating value for shareholders through the creation of a new, potentially profitable company.

In summary, corporate actions are significant events that occur in publicly traded companies and can have a significant impact on their equity price and ownership structure. Investors should be aware of these actions and understand how they may affect their investments.
Where actions occur on the underlying referenced market, a replication occurs on the Spread Bet held with us. For more information, please see the corporate actions page.

Slippage is the difference between your expected order price and that at which the order is executed. Slippage usually occurs during adverse market conditions, and in periods of higher volatility. If you placed a significantly large order, if there isn’t enough volume in the market to maintain your spread, your order will be slipped. This is most likely to occur when the markets are in abnormal market state and experiencing abnormal volatility. Slippage may also occur during gapping events in circumstances where the market has opened with a price differing to the previous close and the existing order is place in between these two levels. Referencing stops, the stop would be slipped to the opening price dependant on the position size, in the case of a limit order the order price would be improved to the opening level.

There is no minimum account balance pre-set. However, you must maintain sufficient funds in your account to cover the margin requirement for your open positions, or you will face liquidation of one or more positions.

A margin call is a notification to a trader that additional funds are required to maintain an open position. Margin calls occur when the account balance falls below the required margin level, which is the minimum amount of funds required to maintain an open position.

In Spread Betting, margin is the amount of money required to open and maintain a position. Traders are required to maintain a certain margin level, which is a percentage of the total position value. If the margin level falls below a certain threshold, Spread Co will endeavour to issue a margin call to the trader, requesting that they deposit additional funds to bring the account balance back up to the required level.

If the trader fails to deposit additional funds, we may close out some or all of the trader’s open positions in order to bring the account balance back up to the required margin level. This can result in significant losses for the trader, especially if the market has moved against their positions.

Margin calls are an important aspect of risk management in Spread betting, as they help to ensure that traders do not take on excessive risk and are able to maintain their positions. It’s important for traders to monitor their margin levels and to have a solid risk management plan in place to avoid margin calls and potential losses.

Please refer to our market information sheet for details.

If you wish to place a trade, you will need to place a ‘deposit’ in respect of each open trade in your account, these ‘deposits’ are also known as ‘margin’. The margin for opening a spread bet for all trades depends on two variables:

Margin Rate
The Margin Rate is calculated by reviewing the risk factor applied to each financial instrument. This factor varies according to the liquidity and the volatility of each financial instrument. Markets which have higher liquidity and lower volatility generally have a lower Margin Rate.
The Margin Rate for equities, indices, forex and commodities is a percentage of the notional value of your trade. Margin Rates can be found on the trading platform and the market information sheet of each individual market.

Stake
When you place your trade, you will need to decide on how much you wish to trade per point. You can start with a minimum of £1 per point on any financial instrument, this amount is known as a stake.

Your stake is a per unit stake, as opposed to a fixed stake. The size of your stake determines how much you make or lose for one unit movement in the price of a financial instrument. To understand the minimum movement of a particular instrument please refer to market information of each market. The more the price of the financial instrument moves in your favour, the more profit you make and similarly the more the price moves against you, the more you lose. For this reason, it is important you understand that if the price of the financial instrument moves substantially in the opposite direction, your losses can increase considerably.

Margin for Indices, Foreign Exchange, Commodities and Bullion Positions
Because you do not have to pay the full amount of your position size, Spread bets enable you to increase the amount of exposure to an instrument through leverage. This means you can trade a larger position than if you traded simply using the funds you placed in your account. Leverage has the effect of magnifying the profits or losses on your trading capital. The maximum amount of leverage available to you varies with the instrument you are trading, for example, on equities the margin requirement is typically 20%, so you can trade £20,000 worth of shares with just £4,000 in margin. A professional client who has a margin requirement of 5% would require £1,000.

Professional accounts have increased leverage based on trading experience and asset values. For more information on how to become a professional client click here 

Spread Co require traders to maintain a certain margin level, which is expressed as a percentage of the total position value. This percentage can vary depending on the underlying asset being traded, the volatility of the market.

The margin requirement for a position is calculated by multiplying the relevant Spread Bet stake time the price by the applicable margin rate:

Margin requirement = (Price * stake) x (margin rate), the margin amount will be calculated in the asset currency and displayed in the account currency.

Please click here for a trading example that explains margins in detail 

You will be emailed every four hours to inform you that you are on margin call, from the instance the account enters into margin call. It is also important that traders monitor their account to ensure they have sufficient margin for their open positions. 

If you receive a margin call or have a margin deficit on your account, it means that the funds in your account have fallen below the required margin level for your open positions. This can occur when the market moves against your positions, causing losses to accumulate.

If you find yourself on a margin call, the first thing you should do is to review your open positions and assess your exposure to potential losses. You should also check the margin requirements for your positions and determine how much additional funds you need to deposit in order to maintain the required margin level.

In order to avoid the risk of liquidation of your positions, it is generally advisable to deposit additional funds into your account as soon as possible. This will allow you to maintain your positions and potentially recover your losses if the market turns in your favour.

If you are unable to deposit additional funds to meet the margin call, you may need to consider closing out some or all of your positions in order to avoid further losses. This can be a difficult decision to make, but it is important to weigh the potential risks and rewards of each option and to have a solid risk management plan in place.

Ultimately, the key to avoiding margin calls and managing your risk is to carefully monitor your bets, maintain sufficient funds in your account, and have a solid risk management plan in place.

When it comes to adding funds after a margin call, please remember that prompt action is crucial, aligned with market conditions. Margin call notifications are linked to your account valuation, so the timing isn’t fixed.  Depositing funds promptly can help restore your account balance to the required level, providing support for your trades. Please keep in mind that monitoring your positions is your responsibility.

If you fail to top up your account when you are on a margin call or have a margin deficit, Spread Co may close out some or all of your positions in order to meet the required margin level. This is known as liquidation, and it can result in significant losses for the trader.
Spread Co will close out the position that has the largest margin requirement position first and so on, up to the point the account is no longer in Margin call.

Liquidation can be a traumatic experience for traders, as it can result in the loss of all or most of their funds in the account. To avoid the risk of liquidation, it is important for traders to monitor their positions carefully, maintain sufficient funds in their account, and have a solid risk management plan in place.

In summary, if you don’t top up your account when you are on margin call, we may close out your positions, potentially resulting in significant losses. Therefore, it is important to take immediate action when you receive a margin call or have a margin deficit and to ensure that you have sufficient funds in your account to cover your positions.

If you’re currently long (with a buy position), make sure you’re looking at the bid chart (you can change the chart type in the chart itself). If you’re short (with a sell position), you will need to look at the offer chart. If you still feel the stop loss should have been executed, please contact our client services team on +44 (0)1923 832682 or email us at cs@spreadco.com.

Your profit and loss will always be calculated based on the difference between your open price and close price multiplied by the quantity. Profit and loss on Spread bets is calculated in the currency where the account held in e.g. GBP. For example, if you traded on Nasdaq 100, your profit and loss will be booked in GBP. If you still face issues, please contact our client services team on +44 (0)1923 832682 or email us at cs@spreadco.com.

Liquidation in spread betting refers to the process of closing out a trader’s open positions when they no longer have sufficient funds in their account to meet the margin requirements for those positions. For retail clients this is set at 50% of margin requirement.
The liquidation will create a new liquidation trade thereby reducing the open position.

In the event the account only holds a position in one market the whole position would be closed. Where multiple positions are held the total stake held for each market would be closed in order of highest margin requirement  first, to the point where the account is no longer in margin call.
Liquidation can be a stressful and emotional experience for traders, as it often results in significant losses. To avoid the risk of liquidation, traders should monitor their positions closely and ensure that they have sufficient funds in their account to cover their margin requirements. They should also have a solid risk management plan in place to help manage their exposure to potential losses.

Your trading account is subjected to a liquidation process if your account valuation falls below a percentage of the margin requirement (liquidation level) which is required to support your open positions. For retail clients this is set at 50% of margin requirement.

The liquidation process will stop only when your account equity is more than the margin requirement on your remaining positions. Each position is liquidated in full, for each market would be closed in order of highest margin first, to the point where the account is no longer in margin call.

The open positions with the largest margin requirement will be liquidated first.

No you will not be charged extra if you get liquidated, the closing spread cost is applied as normal if closing a position at market. Liquidation can occur during volatile markets, i such cases the risk of stop out are with increased slippage due to the underlying market conditions.

“Cash” is your brought forward cash balance +/- realised P&L.

“Equity”/ “Account valuation” is “Cash” +/- “Open P&L” +/- “Unmatched P&L”.

“P&L Day” displays the real-time unrealised profit/loss of your open trades based on the day open price (The difference between the current price and the day open price multiplied by “Quantity”). The profits or losses are expressed in the traded account currency.

“P&L Total” displays the real-time unrealised profit/loss of your open trades based on the trade open price (The difference between current price and trade open price multiplied by “Quantity”). The profits or losses are expressed in the traded account currency.

The maximum stake size is set at the discretion of the dealing desk for any equity, Index, Commodity or Bullion – this can be viewed in the ‘market info’ section of each market

Yes, your open positions are marked-to-market with real time bid/offer prices.

If you have any questions that aren’t covered on this page, or if you just need our assistance, please call us on +44 (0)1923 832682, email us at cs@spreadco.com or contact us using the ‘Live Chat’ feature on the platform.