Irrespective of whether you want to go long or short on the FTSE 100 – spread betting is the best way to speculate on the UK’s primary stock market index. This is because you won’t be required to pay any tax on your profits, stamp duty is waivered, and you can trade with leverage of up to 20x.
In this guide, we cover the ins and outs of how FTSE 100 Spread Betting UK works and which FCA brokerage sites you should consider.
FTSE 100 Spread Betting UK IN 5 Minutes – Quickfire Guide
You can easily get started with a FTSE 100 spread betting UK position from the comfort of your home by following the quickfire guide below!
Open an account with a top-rated spread betting platform that is authorized and licensed by the FCA. Capital.com is a great option as you can trade the FTSE 100 commission-free and at super-tight spreads.
Make a deposit into your newly created spread betting account. Capital.com requires a minimum deposit of £20 and you can choose from a Visa or MasterCard debit/credit card or an e-wallet.
Head over to the ‘Indices’ section and click on the FTSE 100 market.
Choose from a buy order if you think the price of the FTSE 100 will rise. If you think the FTSE 100 will drop in value – place a sell order.
Enter the amount you wish to stake on each point movement (e.g. £10 per point) and confirm the order.
And that’s all it takes to get started with a FTSE 100 spread betting UK position at Capital.com – commission-free!
Spread Betting FTSE 100 Explained
In its most basic form, by spread betting the FTSE 100 – you are looking to make money from the rise and fall of the index. For example, if you think the value of the FTSE 100 will rise, you will place a ‘long’ spread betting position. If you think that the opposite will happen – you will instead place a ‘short’ position at your chosen spread betting broker.
And of course – if you speculate correctly, you will make a profit. If not, you will lose money. When trading the future value of FTSE 100 – you do not take ownership of any assets. This is the same as a conventional CFD trading site – insofar that the spread betting market will simply track the real-time price of the FTSE 100 like-for-like.
You can spread betting the FTSE 100 with leverage of 20x
The best spread betting sites – like Capital.com and Pepperstone, allow you to trade commission-free
Additionally, FTSE 100 spread betting UK markets can be traded free of stamp duty and capital gains tax. This is in stark contrast to traditional stock trading or forex trading platforms.
How Does FTSE 100 Spread Betting UK Work?
There are several key aspects that you need to have a firm grasp of before you attempt to spread bet the FTSE 100. In entering this marketplace with your eyes wide open – you will have a much better chance of making consistent gains and protecting your bankroll from losses.
As such, in this part of our guide on FTSE 100 Spread Betting UK – we are going to explain the fundamentals in much more detail.
Point Movements and Stakes
First and foremost, the FTSE 100 is priced in points, while traditional shares are valued in pennies.
At the time of writing, the FTSE 100 is being quoted at 6,859.87 points.
If the index increased by 10% – this would see the FTSE 100 priced at 7,545.87 points
In the world of spread betting, this would represent a price movement 686 points
Now, your profit or loss on this trade would depend on two key metrics:
The amount you stake per point movement
Whether or not you correctly predicted the price movement of the FTSE 100
If, for example, you went ‘long’ on the FTSE 100 and staked 50p per point – this trade would have made you a profit of £343. This is because the index moved by 686 points in your favor. However, if you placed the same stake on a ‘short’ order, you would have lost £343.
Fortunately, the best FTSE 100 spread betting UK platforms allow you to set up a guaranteed stop-loss order – subsequently allowing you to limit your losses. For example, if you had set your stop-loss at 40 points – the most you could have lost from the above trade would have been £20 (40 points x 50p per point).
Entering and Exiting the Market
As we have mentioned a couple of times – you need to choose from a long (buy order) or short (sell order) position when trading the FTSE 100 spread betting market.
If you enter the trade with a long position, this means that you think the index will rise in value.
If you enter the trade with a short position, this means that you think the index will fall in value.
When it comes to exiting your FTSE 100 spread betting UK trade (i.e. closing your position) – you need to:
If you entered with a long order, close with a short order
If you entered with a short order, close with a long order
As per the above, the process of entering and exiting a FTSE 100 spread betting UK position is very similar to forex and CFD trading.
Both the CFD and spread betting markets are backed by financial derivatives. In Layman’s Terms, this means that you can speculate on the future price of an asset – like the FTSE 100, without actually taking ownership. As a result of this, you can spread bet the FTSE 100 with leverage.
The FCA allows retail investors in the UK to trade the FTSE 100 with leverage of up to 20x. This means that by staking £1 per point – your position is amplified to £20 per point.
To put it another way:
Let’s say that you enter a long position on the FTSE 100 at £2 per point
You apply leverage of 20x on this trade
The FTSE 100 increases by 30 points
You would have made a profit of £60 had you not applied leverage to your position
But, as you applied leverage of 20x – your profit is amplified from £60 to £1,200
You need to have a full understanding of the risks associated with leveraged spread betting trades. This is because you can lose your entire stake – should your position go against you by a certain amount.
For example, if you traded with leverage of 20x – this translates to a margin requirement of 5% (20/100). As such, if your FTSE 100 spread betting UK trade went in the wrong direction by 5% – your position would be closed by the broker and you would lose your margin.
Irrespective of which spread betting instrument you wish to trade – all markets have an expiry date. This is purposeful – as it allows spread betting to retain its status as ‘gambling’ – meaning no tax is liable on capital gains.
Most spread betting brokers offer at least two trade durations on the FTSE 100 – a daily market and a quarterly market. If you still have an open position on the FTSE 100 and it expires – this simply means that your trade will be closed automatically.
For example, if you are 40 points in profit and the expiry date is triggered – you will still make 40 points. If you wish to remain in the market, you simply need to open a new position.
FTSE 100 Trading vs Spread Betting: What is the Difference?
The only way to trade the FTSE 100 is via a financial derivative. This is because the FTSE 100 is made up of 100 individual shares – all with various weightings. For example, Diageo has a weighting of 3.83% while Natwest Group is much lower at 0.50%. This is because the former has a market capitalisation of £74 billion while the latter is at £22 billion.
With this in mind, when trading the FTSE 100 you can do so via a CFD instrument or a spread betting market. Both operate virtually like-for-like, albeit, spread betting is the better option as your profits are tax-free.
What are the Advantages of FTSE 100 Spread Betting UK?
We have briefly discussed why FTSE 100 spread betting UK is popular with traders and financial speculators. With this that said, if you are still unsure whether this form of FTSE 100 trading is right for you – below we elaborate on some of the core advantages.
FTSE 100 Spread Betting Tax
Perhaps the most advantageous outcome of trading via a spread betting FTSE 100 broker, is that there is no taxation to take into account. This isn’t the case when you buy shares in the traditional way – as if you sell them for more than you initially paid the profits are liable for capital gains tax.
Plus, if you receive any dividends from your shares – this is also taxable. Furthermore, when you initially make the share purchase – you will be charged a stamp duty tax if the company is listed on the London Stock Exchange (LSE).
Note: FCA-regulated broker eToro waivers the aforementioned 0.5% stamp duty tax – should you wish to add some FTSE 100 shares to your portfolio.
On the other hand, when trading the FTSE 100 via a spread betting instrument – you won’t pay any capital gains tax on your profits. As we briefly noted earlier, this is because financial spread betting falls within the remit of gambling.
5% Margin Requirement
During normal economic conditions, the FTSE 100 is a relatively stable asset class. This is because it is backed by some of the largest companies in the UK market. Think along the lines of AstraZeneca, GlaxoSmithKline, HSBC, British American Tobacco, and Unilever.
71.2% of retail investor accounts lose money when trading CFDs and/or spread betting with this provider.
Although this is ideal for risk-averse investors – this does limit your opportunity to make viable gains when trading with small amounts. For example, if you have a £100 in your trading account and make 2% – this amounts to gains of just £2. Fortunately, this is where the benefit of spread betting margin comes into play.
On the FTSE 100, the margin requirement is just 5% – meaning that you can boost your stake by 20x. As such, small gains of £2 quickly transitions into a profit of £40.
Great for Making Gains When the Markets are Falling
Speculating on a spread betting FTSE 100 market is a great way to profit from a stressed UK economy. There have been plenty of examples of this happening over the past five years – with the Brexit referendum standing at the forefront of this.
After all, when there is uncertainty surrounding the UK economy, this will directly impact the value of the FTSE 100. This is because investors will exit their UK stock or ETF positions and thus – the FTSE 100 will decline.
Rather than sitting on the fence when this happens – you might want to consider short-selling the FTSE 100 via a spread betting broker. The more the index falls by, the more profit you will make.
An additional benefit from trading at a FTSE 100 spread betting UK site is that fees, commissions, and spreads are typically very low. For example, if using Capital.com – you can spread bet the FTSE 100 without paying any commission. Additionally, Capital.com charges an industry-leading spread on the FTSE 100 of just 2 points.
Best FTSE 100 Spread Betting Strategies 2021
If you are planning to trade the FTSE 100 – you need to have a strategy in place. This should be the case no matter what financial market you are speculating on.
Technical Analysis: If you are looking to day trade or swing trade the FTSE 100 – you need to learn the art of ‘technical analysis. In its basic form, this means learning how to analyze and interpret historical and current pricing charts. Technical analysis is aided by indicators that focus on metrics like support and resistance levels, volatility, and trading volume.
Hedging: If you are heavily invested in the UK economy – perhaps through stocks, ETFs, or even domestic REITs, you should always be prepared for a potential market slump. If there is a possibility of this happening in the very near future – you might want to consider hedging the FTSE 100. This means that you will enter a short position at your chosen spread betting broker. If the UK economy does take a turn for the worse – you will lose money from your original investments but make a profit from your FTSE 100 short-selling position.
Buy the Dip: Like all indices – the FTSE 100 will go through temporary dips. This might be because of a bit of bad news surrounding the UK economy – like worse-than-expected GDP results. However, as these dips are more often than not temporary – this allows you to enter a long position at a discount. If and when the FTSE 100 recovers, you will make a profit.
If you haven’t yet mastered a FTSE 100 trading strategy – consider opening a free demo account with Capital.com. This will allow you to practice your strategy in a 100% risk-free manner.
Best FTSE 100 Spread Betting Brokers for 2021
If you’re ready to start placing orders on the future value of the FTSE 100 – you’ll first need to open an account with an FCA-regulated spread betting broker. There are a handful of options to choose from, albeit, below we discuss the best FTSE 100 platforms currently in the market.
1. Capital.com – Best Spread Betting Broker UK for Beginners
Capital.com offers more than 3,000 spread betting markets – with the broker covering stocks, ETFs, forex, commodities, and indices like the FTSE 100. There are no commissions charged by this platform and as noted earlier – the benchmark spread on FTSE 100 markets amounts to just 2 points.
The minimum deposit here is a very reasonable £20 – which you can fund with your UK debit/credit card or an e-wallet. Or, you might decide to start off with the Capital.com demo account. This allows you to spread bet the FTSE 100 in actual live market conditions – but without needing to risk any money. As such, you can test-drive one of the FTSE 100 strategies that we discussed earlier in a risk-free manner.
Capital.com offers leverage on its FTSE 100 spread betting market of up to 20x. You can also choose from a long or short position and of course – no stamp duty or capital gains tax applies. You will also find a wealth of educational content on the platform – which is inclusive of guides, webinars, and mini-courses. Capital.com is authorized and regulated by the FCA – so you will be spread betting the FTSE 100 index in a safe environment.
71.2% of retail investor accounts lose money when trading CFDs with this provider.
2. Pepperstone - Best Spread Betting Broker UK for Experienced Traders
Pepperstone is a CFD trading and spread betting broker that is authorized and regulated by the FCA. The platform is potentially more suitable if you are an experienced FTSE 100 trader. Not only in terms of trading tools and platforms, but Pepperstone offers a number of account types that are geared to seasoned professionals.
Regarding the former, you can link your Pepperstone spread betting account with MT4 or MT5. As you likely know, these third-party platforms are super popular with experienced traders-as they are packed with advanced chart reading tools and technical indicators. This will ensure that you are able to perform short-term analysis on the FTSE 100. When it comes to accounts, the Razor Account will often get you spreads of 0 pips - or slightly over depending on market conditions.
Either way, this account ensures that you are not trading through a middleman - meaning you are speculating against other market participants. The Razor Account comes alongside a small commission of $3.50 - which is very competitive. On top of the FTSE 100, Pepperstone also supports shares spread betting, as well as markets on hard metals, energies, forex, and other indices like the Dow Jones, DAX, and NASDAQ 100. At Pepperstone, you can deposit funds via Paypal, debit/credit card, or bank wire.
Start Spread Betting the FTSE 100 Online: Full Walkthrough
If this is your first time spread betting the FTSE 100 index, the step-by-step walkthrough below will show you how to place your first position in less than 10 minutes.
Step 1: Open a Spread Betting Account
Head over to the Capital.com website and register an account. On top of entering your email address and a strong password, you'll need to provide some personal information.
Once you confirm your account by clicking the link that Capital.com sends to your email address, you will be asked to upload a copy of your passport or driver's license. This is to ensure Capital.com complies with the FCA.
Step 2: Deposit Funds
You can now make an instant deposit with your debit/credit card or a supported e-wallet. The minimum deposit is just £20.
Step 3: Search for FTSE 100
Enter 'FTSE 100' into the search box at the top of the page. Like the image below, look out for the 'UK 100' and click it.
Step 4: Enter Long or Short Position
Set up your FTSE 100 spread betting position by clicking on the 'buy' or 'sell' button. As we covered earlier, a buy order is applicable if you want to go long and a sell order if you wish to short-sell the FTSE 100.
Step 5: Enter Stake and Confirm Order
You now need to enter your stake. This refers to the amount you wish to risk for each FTSE 100 point movement - such as £1 per point.
Confirm the order to execute your first FTSE 100 spread betting trade at Capital.com!
Spread Betting FTSE 100 UK Guide: The Verdict?
This guide has explained the core benefits of the FTSE 100 spread betting UK marketplace. On top of tax-free profits and the ability to go long or short - you'll also have access to leverage levels of 20x.
We found that Capital.com is the best spread betting broker to trade the FTSE 100 online. You'll benefit from a super low minimum deposit of just £20, commission-free trades, and a really competitive spread on the FTSE 100 of just 2 points!
71.2% of retail investor accounts lose money when trading CFDs and/or spread betting with this provider.
Can you trade the FTSE 100 online?
Yes, you can easily trade the FTSE 100 from the comfort of your home. More and more traders are deciding to do this via a spread betting site - as you won't pay any tax on your profits. Plus, spread betting FTSE 100 brokers like Capital.com allow you to trade with leverage of up to 1:20.
How does FTSE 100 spread betting work?
The overarching concept with FTSE 100 spread betting is that you need to speculate on whether the index will increase or decrease in value. If you speculate correctly - you will make a profit.
What is FTSE 100 margin trading?
If you speculate on the FTSE 100 with 'margin', this means that you can trade with more capital than you have in your account. Brokers like Capital.com require a margin of just 5% when spread betting the FTSE 100 - meaning you can boost your stake by a factor of 20x.
What are the tax rules on spread betting FTSE 100?
The FTSE 100 - and all spread betting markets for that matter, can be traded without you being liable for any stamp duty or capital gains tax.
Is spread betting regulated in the UK?
Yes, financial spread betting is regulated by the Financial Conduct Authority in the UK.
How is the FTSE 100 valued?
The FTSE 100 is priced in points. Whether the index moves up or down in value, is dependent on the stock price performance of the 100 companies that are listed on the FTSE 100.