Compare the best commodities spread betting brokers
Before you start spread betting on commodities it’s wise to pick a broker that matches your needs. To do that you’ll need to decide what those needs are. Which is where we come in. Read on to learn about commodities spread betting and then, when you’re ready to get started, check out our rundown of the top spread betting brokers.
Where can I find the best platforms for spread betting commodities?
Right here. We’ve done all the legwork and compared all the options so you’ll be well informed when deciding which spread betting platform to use.
What is spread betting?
Spread betting is a practice that involves speculating on the price of an asset (such as a commodity). In essence, the spread bettor is betting on the rise or fall of an asset’s value based on the bid and ask prices quoted by a spread betting broker.
How does commodity spread betting work?
As the bettor, you simply log into your spread betting brokerage account, select the commodity you want to speculate on, take note of the quoted buy and sell prices, and decide whether you want to bet on the price of the commodity rising or falling.
Spread betting vs. CFD trading
There are many similarities between spread betting commodities and CFD trading, but there are also significant differences. Let’s review how each approach works.
- Spread betting. This is a form of derivatives trading. In both spread betting and CFD trading, bettors can use leverage, which means they only need to put down a fraction of the money for the total trade. Also, in both spread betting and CFD trading, participants can choose to bet on the price of an asset going up or down. The biggest advantage that spread betting holds over CFD trading is that, in the UK, spread betting is exempt from capital gains tax, while CFD trading is not.
- CFD trading. A contract for difference (CFD) is an agreement between a buyer and seller that requires the buyer to pay the seller the difference between the current value of an asset and its value at contract time. Perhaps the most significant difference between CFD trading and spread betting (aside from spread betting’s aforementioned tax benefits) is that spread betting is predominantly available in the UK and Ireland, but is now starting to also come up in countries like Sweden, while CFD trading is available around the world. Also, you’ll need a CFD broker account.
So I don’t technically ‘own’ the assets I’m trading on a spread betting platform?
Correct. When spread betting commodities, you’re betting on the price of an asset going up or down, without actually owning the commodity asset. This means you don’t have to deal with the hassle, worry and expense of keeping your assets safe. It also means you can trade faster and take advantage of market fluctuations to carve out gains.
What should I look for in a spread betting service?
- Find a regulated platform – In the UK, the Financial Conduct Authority (FCA) leads a group of five major regulators that oversee most reputable UK spread betting brokers. Make sure the spread betting service you pick is regulated by the FCA and other regulatory bodies.
- Variety of payment methods – Make sure you select a spread betting broker that allows you to deposit and withdraw funds in a way that fits your needs. In addition to typical methods, such as bank transfers, some platforms offering spread betting commodities will now even accept deposits in cryptocurrency.
- Suitable deposit and withdrawal limits – Deposit and withdrawal limits will vary from platform to platform. Make sure you pick a spread betting platform that suits the the level of trading you want to do, whether it’s small commodity bets or big trades that require a serious bankroll.
- Good reputation – User reviews, media coverage and awards can all be good gauges of a spread betting broker’s reputation. Do your research to find a broker that ticks all the boxes.
- Design and ease of use – Don’t overlook design and ease of use when picking a commodity spread betting broker. Speed of navigation can be a decisive factor when you need to act quickly, and a badly designed platform can make the whole process unnecessarily complicated.
- Variety of commodities – There are many different commodities out there. Make sure the spread betting platform you select offers a comprehensive variety of commodities.
What are the tax laws on spread betting profits?
In the UK, spread betting is exempt from both capital gains tax and stamp duty. That gives it an advantage over CFD trading, stock investing and other trading methods.
Is online commodity spread betting secure?
When it comes to security, spread betting is no different from CFD trading, stock market investing or other trading methods. As long as you choose a reputable, regulated trading platform, your trades will be secure. Use our reviews to find the best, most trustworthy spread betting platforms.
Can I bet on multiple assets?
Yes, commodity spread betting does give you the ability to bet on multiple assets. The bonus is that you won’t need to store any of those assets, since you won’t actually own the commodities you’re speculating on.
Do spread betting platforms charge fees?
Typically, spread betting platforms don’t charge fees. Instead, commodity spread betting brokers make money on your bet based on the spread itself. If a commodity is normally priced at £100 to buy and £101 to sell, a spread bet might carry quotes of £99 to sell and £102 to buy.
What are the advantages of using a spread betting platform?
Spread betting platforms are set up to make the process of spread betting commodities effortless, so you don’t need to do any additional legwork. Simply punch in the commodities you want to bet on and the spread betting platform will execute the transaction instantly.
And what are the drawbacks?
Some investors prefer the hands-on feeling that comes with actually owning a physical commodity. If ownership is important to you, you’re better off buying commodities on a brokerage or exchange, rather than speculating on a spread betting platform.
Spread betting is also a bit more complicated than simply buying a physical asset at a certain price and selling down the road, so you’ll need a bit more technical financial knowledge in order to take full advantage of a spread betting platform.
Should I use a spread betting broker?
You’ve read about the pluses and minuses of spread betting on commodities and using the brokers, so at this point the choice is yours. If you want to bet on oil or precious metals quickly and easily, without having to worry about keeping the assets safe from thieves, then going through a spread betting broker is a great option.
Hopefully we’ve given you a decent introduction to the fundamentals of commodities spread betting. Check out our top frequently asked questions to delve a bit deeper.
American math teacher turned securities analyst turned bookmaker Charles K. McNeil invented spread betting in the 1940s. A City of London investment banker named Stuart Wheeler turned it into an established investment concept, starting a firm called IG Index in 1974 that offered spread betting on gold.
Spread bettors aren’t short of choice. You can place spread bets on forex, commodities, stock market indices, shares of stock and bonds.
All spread bets come with a fixed time period. That period can range from a single day to several months. You are allowed to close your spread bet before the set expiry date if you like.
You have to overcome the price spread just to break even.
Generally speaking, the more popular the traded asset, the tighter the price spread will be. Nonetheless, it’s worth shopping around for the platform that offers the tightest spread on a commodity you want to bet on.
If you guess right, you’ll make a much bigger gain than if you merely placed a standard bet with your own money.
The exact opposite: If the price fluctuation goes against your prediction, you’ll sustain a much bigger loss than if you bet without leverage.
Put in a standard stop-loss order. Stop-loss orders reduce risk by automatically closing out a losing trade once a market passes a set price level. With a standard stop-loss order, your trade will close at the best available price once the stop value has been reached. A volatile market can result in the position being closed at a worse price than your set stop price, however.
Yes. You can place a guaranteed stop-loss order, which ensures that the price you set ends up being the same as the price your position is closed. You’ll have to pay a premium for a guaranteed stop-loss order.
Arbitrage refers to the process of buying low and selling high on a financial instrument at the same time. Spread-betting arbitrage opportunities can pop up when the prices of identical financial instruments vary between different markets or companies. The best way to find a spread betting arbitrage opportunity is by looking for two spread betting companies that are offering divergent prices on the same asset. Arbitrage enables a trader to make a guaranteed profit, whichever way the market moves.
- 1. Compare the best commodities spread betting brokers
- 2. Where can I find the best platforms for spread betting commodities?
- 3. What is spread betting?
- 4. How does commodity spread betting work?
- 5. Spread betting vs. CFD trading
- 6. So I don’t technically ‘own’ the assets I’m trading on a spread betting platform?
- 7. What should I look for in a spread betting service?
- 8. What are the tax laws on spread betting profits?
- 9. Is online commodity spread betting secure?
- 10. Can I bet on multiple assets?
- 11. Do spread betting platforms charge fees?
- 12. What are the advantages of using a spread betting platform?
- 13. And what are the drawbacks?
- 14. Should I use a spread betting broker?
- 15. FAQs