What are the benefits of spread betting?
Financial spread betting is a relatively new concept in trading terms for the private investor. The flexible nature of this product has ensured that complex forms of derivative trading that were generally out of reach to private investors are now available for investment through a single platform. Instruments such company shares, indices, commodities, options and currencies are accessible through most platforms.
Financial spread betting carries a number of tax advantages over traditional methods of trading such as share dealing for instance, where stockbrokers include commissions on trades and any profit made from the purchase and subsequent sale of shares is subject to Capital Gains Tax.
Tax free trading*
For UK residents any profit made from financial spread betting are completely free of Capital Gains and Income tax. In addition financial spread bets are also free from stamp duty.
* Tax laws can be changed or may differ if you pay tax in a jurisdiction outside the UK.
Control more with less
Spread betting is a form of margin trading. An investor is required to pay a fraction of the actual cost of a trade in advance, typically 10% of its value. This enables the individual to be exposed to 100% of the price movement at a significantly lower initial cost. This allows an investor to leave the remaining 90% of the cost in the bank or use as capital elsewhere. By contrast, using conventional share dealing methods will normally require an outlay of 100% of the value of the trade at the outset.
An investor should be aware that with traditional share dealing methods, the initial outlay is the maximum amount that can be lost on any trade. However, spread betting requires just a small fraction of the total cost of the trade. The upside is that an investor will pay 10% of the value of the trade in order to enjoy 100% of the profits. The downside is that if the bet works against the individual, further funds will be required from the client.
Profit from a rise or a fall
An investor has the potential to profit from either a rising or falling market through spread betting. The individual can choose to sell (or go short) on an instrument, such as a market or individual share, that they do not own with the intention of buying it back at a lower price at a later stage, profiting from the fall in value.
0% Commission
There are no commissions associated with spreadbetting. The costs associated with the spread bet are built in to the bid-offer price.
Trade Smaller Contract Sizes
When Spread Betting with ETX Capital the minimum bet size is 50p per point. This minimum market entry point is often much smaller than what would traditionally be required to trade the underlying markets.
Trade on International Equity Markets with No Currency Risk
Once a client has nominated their account currency (£, $ or €) all transactions thereafter are processed in this chosen currency thereby nullifying any potential currency risk.
You can apply now to open up an account with us here at ETX Capital and benefit from our offer of a free copy of The Beginner’s Guide to Financial Spread Betting to help you learn more.
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