Spread Betting Explained

What is financial spread betting?

Financial spread betting is a unique, cost effective form of trading global financial markets. It enables you to profit from rising AND falling markets quickly and simply.

With Dealing Desk you can speculate on the movement of Stocks, Commodities, Currencies, Indices and Bonds without using a stockbroker and without paying commission or fees.

How does it work?

Once you have chosen the market you may want to trade, you’ll see two prices quoted: a BUY price and a SELL price. The difference between the two prices is known as THE SPREAD. The prices that we quote are calculated around the live market price of a financial product.

When spread betting, you do not buy the stock or share but instead you place a trade which way you think the market will move. You can trade per penny or point movement. The amount you wish to trade is known as the “stake” and can be as little as £1 per point or penny movement.

Here is an example:

If the UK FTSE 100 stands at 5700.5 our quote might be 5700.0- 5701.1. You think that the UK FTSE 100 will rise and so you decide to “buy” at 5701.1 for £2 per point.

At 5701.0 the FTSE 100 begins to rise to 5721.0 when you decide it’s time to close the trade.

Your profit would then be calculated from the difference between the original BUY price of 5701.0 and the closing SELL price of 5721.0. That’s an increase of 20 points, multiplied by £2, giving you a total profit of £40.

Obviously if the FTSE 100 had started to fall below the level at which you had bought at (57601.0) then your trade would begin to incur a loss. This is calculated in the same way as your profit.

What are the benefits and risks of financial spread betting?

Trade on margin

Spread betting is a margined product which means that there’s no need to tie up large amounts of your capital in order to place a trade. When you’re ready to trade, you only need to deposit a small percentage of the full value of your position. This is known as margin.

No commissions or fees

Dealing Desk is not a stockbroker so we do not charge commissions or fees when you open or close a trade – we make our profit from the spreads we apply.

Alternative to traditional stock trading

Financial spread betting differs from traditional share trading in that you are not actually buying or selling physical shares in a company. Instead you are buying or selling on the expectation of a particular market rising or falling. Furthermore, traditional share trading focuses on the buying and selling of company shares and securities only. With financial spread betting, the trading options are almost endless: Commodities, Stocks, Currencies, Bonds and Interest Rates.

Tax free profits

Under current UK legislation, all betting profits are recognised as the winnings of a bet and are therefore free of capital Gains and Income Tax. Financial spread betting is also exempt from UK stamp duty. Tax treatment depends on the individual circumstances of each client and may change in the future.
Go “short” or “long”

Falling markets may not always be bad news. Spread betting enables you to make money when prices are going down in just the same way as when they’re rising.

If you think a market is overvalued and it is going to fall in price, you can go “short” by opening a sell trade. The further the market has fallen when you close your trade the higher your profit.

Small stake sizes

Spread betting allows you to trade in smaller sizes than those usually available in the underlying market.

Wide range of markets

You can trade on thousands of different markets from around the world including Induces, Shares, Currencies and Commodities.

Trade in one currency

Unlike other financial products, spread betting allows you to trade in one currency. For example, you can trade on US shares with a sterling account. This means you avoid costly currency exchange fees and the risk of fluctuations in exchange rates.

Regulated industry

Financial spread betting is tightly regulated by the Financial Services Authority (FSA). This means we have to abide by strict rules and regulations and you have the comfort of knowing that you are working with a reputable organisation.

The risks

Financial markets, by their very nature, are very risky whether you are trading or investing in them via financial spread bating or any other form.

Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, sp please ensure that you fully understand the risks involved.

How to get started

Apply for an account

Applying for an account with Dealing Desk couldn’t be easier. Log on to DealingDesk.co.uk  and click on the “Apply For an Account” button and your live account could be open within minutes (accounts are subject to status and application made between 08:00 – 19:00 Monday to Friday).

Remember that all information requested on the application form is required and without it we are unable to open your account. We will then conduct an electronic check to conform yore identity and that you reside at the address you supplied. If you are not listed electronically, we may ask you to send us further documentation.

Please ensure you are aware of the risks before you apply for an account and if necessary, seek independent advice. Each and every account application is individually reviewed and applications are subject to status.

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