Irrespective of whether you want to go long or short on the FTSE 100 – spread betting is the a 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 review the ins and outs of how FTSE 100 Spread Betting UK wise works and which FCA brokerage sites you should consider.
In This Guide
Prospective traders could get started with a FTSE 100 spread betting UK position from the comfort of your home with these steps:
And that’s all it takes to get started with a FTSE 100 spread betting UK position at Pepperstone.
Spread betting is only available for clients in the UK.
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.
81.40% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
As we cover in more detail in the section below – there are several characteristics that make FTSE 100 spread betting UK a popular marketplace for traders – such as:
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.
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.
First and foremost, the FTSE 100 is priced in points, while traditional shares are valued in pennies.
Now, your profit or loss on this trade would depend on two key metrics:
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, many 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).
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.
When it comes to exiting your FTSE 100 spread betting UK trade (i.e. closing your position) – you need to:
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:
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.
Many 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.
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.
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.
One 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.
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.
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 could transition into a profit of £40.
Speculating on a spread betting FTSE 100 market is one possible 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 Pepperstone – you can spread bet the FTSE 100 with low fees. Additionally, Pepperstone charges an industry-leading spread on the FTSE 100 of just 2 points.
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.
Below we list a few FTSE 100 spread betting strategies that you might want to consider:
If you haven’t yet mastered a FTSE 100 trading strategy – consider opening a free demo account with Pepperstone. This will allow you to practice your strategy in a 100% risk-free manner.
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 review FTSE 100 platforms currently in the market.
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 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. As well as 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.
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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.
Join a regulated spread betting platform. After 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 sent to your email address, you will be asked to upload a copy of your passport or driver’s license. This is to ensure a regulated broker complies with the FCA.
You can now make an instant deposit with your debit/credit card or a supported e-wallet. The minimum deposit is just £20.
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.
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.
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.
This guide has explained the core benefits of the FTSE 100 spread betting UK marketplace. As well as tax-free profits and the ability to go long or short – you’ll also have access to leverage levels of 20x.
We found that Pepperstone is a well-known spread betting broker to trade the FTSE 100 online. You’ll benefit from a super low minimum deposit of just £200, low fees, and a really competitive spread on the FTSE 100 of just 2 points.
Many do trade the FTSE 100 from the comfort of their 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 allow you to trade with leverage of up to 1:20.
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.
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 require a margin of just 5% when spread betting the FTSE 100 - meaning you can boost your stake by a factor of 20x.
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.
Yes, financial spread betting is regulated by the Financial Conduct Authority in the UK.
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.
Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner.
Kane has also written for websites such as MoneyCheck, InsideBitcoins, Blockonomi, Learnbonds, Buysharesand the Malta Association of Compliance Officers.
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