What is spread betting?

Capitalise on rising and falling markets with a tax-free* alternative to conventional trading

Financial spread bets are derivative products that enable you to speculate on the price of a financial instrument, like a share, stock index or commodity.

The more the price moves in your favour, the greater your profit. The more the market moves against you, the greater your loss. 

You take a position by betting a certain amount per point of movement. Crucially, you never need to own the underlying asset, and because you’re betting on a direction there’s the potential to profit from both rising and falling markets. However, you should be aware that there is also the potential to lose more than your initial deposit should the market move against you.

Betting on a price increase is referred to as ‘buying’, or ‘going long’, while betting that it will fall is ‘selling’, or ‘going short’.

Why spread bet?

Shorting the market

Spread betting allows you to bet on falling as well as rising markets – providing opportunity in all conditions.

Leverage

Spread betting is a leveraged product, which enables you to deal without putting up the full value of the position. Remember, though, that leverage also adds to your risk.

Tax free* profits

Any profits you make won’t be subject to capital gains tax. Spread betting is also exempt from stamp duty.

24-hour markets

Spread betting offers round-the-clock dealing opportunities on markets such as forex and major stock indices, even if the underlying market is closed.

What are the risks?

Any financial product comes with risk attached – you can lose money if the market turns against you. It's important to note that, as spread betting is a leveraged product, the associated risks can be greater.

What is leverage?

Leverage enables you to gain exposure to a financial market while only putting up a comparatively small amount of money.

Why is it risky?

While you only need a fraction of the value of the position to open a deal, any profit or loss is based on its full value – so both can be magnified in comparison to the amount you initially deposit. Without due care and responsible risk management, it’s possible to amass substantial losses in a short space of time. This is particularly true if the market jumps suddenly, or ‘gaps’, in response to an unexpected event.

What is ‘slippage’?

‘Slippage’ is the term used to describe what happens when it is not possible to fill an order at the precise level that was originally specified. Slippage can occur for a variety of reasons, including:

  • A significant difference between the underlying market opening level and its previous closing level. For example, a US stock may close at $50 but re-open much lower the following day at $46. A market order which had been put in to ‘sell’ at $48 cannot possibly be filled at this level and would instead be executed at $46. In this case, $2 of slippage has been applied to the original order.
  • The underlying market experiences high volatility – perhaps due to news events – which causes the price to move very rapidly through your requested order level. In this instance the order may be filled at the first point that is reasonably possible, which may be less advantageous to you.

How to avoid slippage

When executing a trade with IG using current live prices, we guarantee we will never subject you to slippage i.e. we will never complete your request at a worse price than when you clicked on the deal ticket. Instead, if the market moves against you, we'll ask you to resubmit your order rather than filling it at a price you don't want.

IG clients can also use a guaranteed stop on closing orders attached to existing positions in order to avoid slippage. The order you place to exit your position is guaranteed to be filled exactly where you specify, no matter what occurs in the underlying market. Please note there is an additional charge applied for this service.

Benefits of slippage

It is worth noting that slippage can also result in orders being filled at more advantageous levels than originally specified. If the market moves in your favour, you may be eligible to be filled at a more favourable level. At IG, this ‘positive slippage’ is available to clients across all product groups when placing orders and when dealing on live prices – this is called price improvement.

Managing your risk

Develop your skills and expertise slowly

New clients can deal with reduced minimum bet sizes for two weeks through our introduction programme.

See all account benefits

Monitor your open positions

Use our free mobile and tablet apps to monitor your positions and react to market movements on the go. 

See our free apps

Understand the markets and keep learning

Use our experts’ insight and analysis to guide and inform your decision making.

View our resources

Apply stops and limits

Our easy-to-apply automated risk management tools are designed to save you time and offer a level of security. 

Discover our tools

Who spread bets?

If you already actively trade the financial markets, spread betting is an alternative way to take advantage of price movements, without having to buy the underlying asset

The risks involved mean spread betting isn’t suitable for everyone, but it generally attracts:

  • Traders seeking tax-free profits*
  • Share traders looking to diversify their portfolios
  • People with an interest in financial markets and the factors that affect their volatility
  • Those looking to add flexibility to their investment capital, through leverage

*Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.