The best way to trade the FTSE 100 is with spread betting, regardless of whether you want to go long or short. Due to the fact that there is no tax on profits, stamp duty is waivered, and leverage of up to 20x is available.
This guide explains how FTSE 100 Spread Betting works and which FCA brokerage sites you should consider. Nevertheless, if you are based out of the United States and are looking for tax-efficient trading, spread betting might be worth considering since it is illegal to trade spread betting in the US.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
In This Guide
Following the quickfire guide below, you can easily open an FTSE 100 spread betting position from the comfort of your home.
All you need to do is sign up for an FTSE 100 spread betting position at Pepperstone
In its simplest form, spread betting the FTSE 100 allows you to profit from the rise and fall of the index. If you expect that the value of the FTSE 100 will rise, you will place a ‘long’ spread betting position. Instead, you will place a ‘short’ position at your chosen spread betting broker if you think the opposite will happen.
Speculating correctly will also yield a profit. Otherwise, you will lose money. FTSE 100 future value trading does not involve taking ownership of any assets. That is the same as a conventional CFD trading site – in the sense that the spread betting market will follow the real-time price of the FTSE 100.
76.25% of retail investor accounts lose money when trading CFDs with this provider.
In the section below, we discuss in greater detail why FTSE 100 spread betting is such an attractive market for traders. Among them are:
Furthermore, FTSE 100 spread betting markets can also be traded without stamp duty or capital gains tax. The approach contrasts radically with traditional stock and forex trading platforms.
Before you spread bet the FTSE 100, you need to know several key aspects. Then, when you enter this market with your eyes wide open, you will be more likely to make consistent gains and protect your bankroll from losses.
So, in this part of our guide to FTSE 100 Spread Betting, we will explain the fundamentals in much greater detail.
In the first place, the FTSE 100 is priced in points, whereas traditional shares are priced in pennies.
For example:
On this trade, you will make or lose money depending on two key metrics:
For example, if you had invested 50p per point on the FTSE 100, you would have made £343. That is because the index rose by 686 points. However, the same stake would have resulted in a loss of £343 if you had placed a ‘short’ order.
The best spread betting platforms for FTSE 100 allow you to set up a guaranteed stop-loss order – allowing you to limit your losses. So, for example, if your stop-loss had been set at 40 points, the maximum you could have lost on the above trade would have been £20 (40 points x 50p per point).
Trading the FTSE 100 spread betting market requires you to select either a long (buy order) or a short (sell order) position.
To exit your FTSE 100 spread betting trade (i.e., close your position), you need to:
According to what has been stated above, FTSE 100 spread betting positions are entered and exited in much the same way as forex and CFDs.
Spread betting and CFD markets are based on financial derivatives. That means that you can speculate on the future price of an asset – such as the FTSE 100 – without actually owning it. Due to this, you can spread bet the FTSE 100 with leverage.
The FCA allows retail investors to trade the FTSE 100 with leverage as high as 20x. So if you stake £1 per point, your position is multiplied by £20.
In other words:
To trade leveraged spread betting successfully, you need to understand all the risks involved. For example, you can lose your entire stake if your position goes against you by a certain amount.
In the case of 20x leverage, this translates to a 5% margin requirement (20/100). Consequently, if your FTSE 100 spread betting trade went in the wrong direction by 5%, your position would be closed by the broker, and you would lose your margin.
Regardless of what spread betting instrument you wish to trade, all markets have an expiration date. Spread betting retains its status as ‘gambling,’ meaning capital gains on spread betting are not subject to tax.
On the FTSE 100, most spread betting brokers offer at least two trade durations: a daily market and a quarterly market. So if you still have an open position on the FTSE 100 when it expires, close it.
You will still make 40 points if you are 40 points in profit and the expiry date is triggered. Then, simply open a new position if you wish to remain in the market.
To trade the FTSE 100, you must use a financial derivative. The FTSE 100 is a composite index of 100 individual shares, each with a different weighting. Diageo, for example, has a weighting of 3.83%, while Natwest Group has a much lower weighting of 0.50%. In this case, the former has a market capitalization of £74 billion, whereas the latter has £22 billion.
That is the reason why, when trading the FTSE 100, you can choose to do so using a CFD instrument or a spread betting market. Even though both are operated practically like-for-like, spread betting is the best option because profits are tax-free.
For several reasons, traders and financial speculators enjoy FTSE 100 spread betting. However, if you’re still unsure whether this form of FTSE 100 trading is right for you, below, we elaborate on some of its key advantages.
A major advantage of trading through an FTSE 100 spread betting broker is no taxation to worry about. In contrast, the profits are taxable as capital gains if you buy shares the traditional way and sell them for more than you paid for them.
In addition, if you receive a dividend from your shares, it is also taxable. Furthermore, if the company is listed on the London Stock Exchange (LSE), you will have to pay stamp duty tax at the time of purchase.
If you want to invest in FTSE 100 shares, FCA-regulated broker eToro waives the 0.5% mentioned above stamp duty tax.
If, however, you trade the FTSE 100 through a spread betting instrument, you won’t have to pay capital gains tax. That is because financial spread betting falls within the remit of gambling, as we briefly discussed earlier.
The FTSE 100 is a relatively stable asset class under normal economic conditions. That is due to its backing by some of the biggest companies in the market. Consider companies such as AstraZeneca, GlaxoSmithKline, HSBC, British American Tobacco, and Unilever.
You will have a limited opportunity to make viable gains when you trade with small amounts, although this is ideal for risk-averse investors. For example, if you have £100 in your trading account and make 2% – this amounts to just £2 gains. Fortunately, a spread betting margin can be used in this situation.
If you increase your stake in the FTSE 100 by 20x, the margin requirement is just 5%. Therefore, small gains of £2 turn into profits of £40 very quickly.
An economy in crisis is the perfect time to profit from spread betting on the FTSE 100. During the past five years, we have seen plenty of examples of this – the Brexit referendum stands out as the most recent example.
When the economy is uncertain, the FTSE 100’s value will suffer. FTSE 100 will decline because investors will exit their stock or ETF positions.
Consider shorting it through spread betting instead of sitting on the fence when the FTSE 100 goes down. The more the index falls, the more profit you’ll make.
Another advantage of trading at an FTSE 100 spread betting site is that fees, commissions, and spreads are typically low. Pepperstone, for example, offers spread betting on the FTSE 100 without commission. Moreover, Pepperstone charges an industry-leading spread on the FTSE 100 of just 2 points.
To trade the FTSE 100, you need to have a strategy in place. This should always be the case no matter what financial market you speculate on.
You might want to consider the following FTSE 100 spread betting strategies:
Technical Analysis: You need to learn the art of ‘technical analysis if you plan to day trade or swing trade the FTSE 100. That means learning how to analyze and interpret historical and current pricing charts in their simplest form. Indicators that measure support and resistance levels, volatility, and trading volume aid technical analysis.
Hedging: It is always a good idea to be prepared for a potential market slump if you have a significant investment in the economy, such as stocks, ETFs, or even homegrown REITs. Hedging the FTSE 100 may be a good idea if there is a possibility of this happening very soon. As a result, you will enter a short position with your chosen spread betting broker. Short-selling the FTSE 100 would be profitable even if the economy did take a turn for the worse.
Buy the Dip: The FTSE 100 is prone to temporary dips, as are all indices. For example, it might be related to bad news regarding the economy, like worse-than-expected GDP results. Because these dips are more often than not temporary, you can enter a long position at a discount. You will make a profit if and when the FTSE 100 recovers.
If you have not yet mastered your FTSE 100 trading strategy, consider opening a free demo account with Pepperstone. Then, your strategy can be practiced in a completely risk-free environment.
You’ll need to open an account with an FCA-regulated spread betting broker before you can start placing orders on the future value of the FTSE 100. However, despite the multitude of options available, below, we discuss the best FTSE 100 platforms currently available.
Pepperstone is an FCA-authorized and regulated CFD and spreads betting broker. As a result, a trader with experience in the FTSE 100 may find the platform more suitable. Furthermore, Pepperstone offers many account types designed for seasoned professionals, not only in terms of tools and platforms.
Pepperstone spread betting accounts can be linked to MT4 or MT5. It is well known that these third-party platforms are super popular with experienced traders, as they offer advanced chart reading tools and technical indicators. In this way, you will be able to perform a short-term analysis of the FTSE 100. In addition, the Razor Account will often give you spreads of 0 pips – or slightly over, depending on market conditions.
Either way, this account ensures that you do not trade through a middle man – which means you are not speculating against other market participants. A small commission of $3.50 with the Razor Account is very competitive. Besides the FTSE 100, Pepperstone also offers spread betting on shares, hard metals, energy, forex, and other indices such as the Dow Jones, DAX, and NASDAQ 100. Deposits can be made via PayPal, debit/credit card, or bank wire at Pepperstone.
Pros:
Cons:
In the investment industry, IG is a well-known and trusted company with several divisions in online brokerage. This category includes spread betting, CFDs, forex, and stocks and funds. With IG, you have access to more than 17,000 spread betting markets.
With a strong focus on forex, indices, shares, and commodities. Long and short positions are available and leveraged on every spread betting market. You are limited to 1:30 if you are a retail client.
For professionals who open an IG account, the limits are much higher. That stands at over 1:222 when you consider spread betting on currency pairs, indices, and commodities. IG also offers Negative Balance Protection, which ensures you will never lose more than your balance permits when entering leveraged positions.
Commission-free spread betting is available from IG. However, keep an eye on IG spreads since they are largely very competitive shares, or an index can be traded for 0.1 points, a commodity can be traded for 0.3 points, and a currency can be traded for 0.6 points.
If you believe IG can meet your spread betting needs, you can trade directly through their website. In addition, the broker offers a mobile app for iOS and Android devices. This top-rated spread betting platform requires a $250 minimum deposit.
Your Money Is At Risk.
After reading this Pepperstone review, you now know the platform’s key features and relevant aspects. So let’s start learning how it works.
Creating an account on the Pepperstone app should take less than a minute, and the first step is to enter your account details. The website allows you to create an account by clicking “Create Account” and entering your email address. By connecting your existing account with Pepperstone, you can sign up even if you already have a Google, Facebook, or Apple account.
To open an account with Peperstone, you must deposit at least twenty pounds. You can use a credit-debit card or wire transfer to deposit funds. Click on ‘Fund my account’ to deposit funds.
At the top of the page, enter ‘FTSE 100’ in the search box. You can find the ‘100’ by looking for the image below.
By clicking the ‘buy’ or ‘sell’ buttons, you can set up your FTSE 100 spread betting position. As mentioned earlier, if you wish to go long on the FTSE 100, a buy order would be appropriate. A sell order would be appropriate if you wish to short the FTSE 100.
Now you need to enter your stake. You decide how much you want to risk for every FTSE 100 point movement – for example, £1 per point.
You have successfully executed your first FTSE 100 spread betting trade at Pepperstone!
In this guide, we have explained the core benefits of the FTSE 100 spread betting market. You’ll also have access to leverage levels of 20x on top of the tax-free profits and the ability to go long or short.
Our research found Pepperstone to be the best spread betting broker for trading FTSE 100 online. There is a really low minimum deposit of just $20, commission-free trades, and a competitive spread of just 2 points on the FTSE 100!
Margin trading on the FTSE 100 means you can trade with more capital than you have in your account. For example, spread betting the FTSE 100 requires a margin of just 5%; this means you can boost your stake by a factor of 20x.
Yes, from the comfort of your home, you can trade the FTSE 100. Spread betting sites are becoming more and more popular with traders, as you won't have to pay taxes on your profits. FTSE 100 spread betting brokers such as Pepperstone also offer leverage as high as 1:20.
With FTSE 100 spread betting, you need to predict whether the index will rise or fall in value. You can make a profit if you predict correctly.
Spread betting is currently not legal in the United States. Moreover, US citizens are generally not permitted to open spread betting accounts with most spread betting companies in the United Kingdom. However, they may offer contracts for difference (CFDs).
Stocks of the FTSE 100 are valued in points. So for the FTSE 100 to move up or down in value, the stock price performance of the 100 companies listed on the index will influence that.
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