Spread betting

Quick definition

Spread betting is a way of speculating on price changes in the financial markets.

Key details

  • With spread betting you never take ownership of any assets yourself, you simply bet on how you expect them to move.
  • It offers the option of predicting price movements in both directions, so you can bet on prices to rise as well as fall.
  • Unlike most forms of trading, you don’t have to pay tax on any money you make from spread betting.

What is spread betting?

It’s a means of predicting how a financial asset is going to perform by placing a bet on whether you think the price is going to rise or fall. You make money based on the amount of movement multiplied by the value of your stake.

When you spread bet, you don’t actually buy any of the assets themselves, it’s simply a means of speculating on which way the price is going to move. That means that there are fewer restrictions on when you can do it – you can place bets 24/7, not just during regular trading hours – and how, such as the fact you can bet on a price to go down as well as up.

Spread betting is often used in tandem with leverage, so that you can place bets that are much larger than the value of your initial deposit. That gives you the chance to get exposure to assets which might otherwise be out of your reach, or to more assets than would have been possible from your original investment.

How does spread betting work?

By offering a buy and sell price that’s based on the performance of the underlying asset. You simply have to decide which bet to place, depending on how you think the asset is going to perform. The difference between these two prices is known as the ‘spread’.

For each bet, you decide on a stake per ‘point’ of movement. If a stock rose from £1.50 to £2 then it would have gone up 50 points, so that a £10 stake would have made £500 in profit. However, the reverse is also true: if the price had dropped by 50 points then that same stake would have made a £500 loss.

What’s the difference between spread betting and CFD trading?

Spread betting is tax-free, while you have to pay taxes on profits you make through CFD trading. Beyond that distinction, there is very little difference between the two. In both cases, you can speculate on how prices are going to change without having to take ownership of the assets themselves.

Where can I learn more?

For more information about spread betting, and other financial concepts, check out our stock market courses. To learn more about investing in a particular area, visit our stock, cryptocurrency, or commodities hubs.

Sources & references
Risk disclaimer

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.