When you buy shares in the traditional sense – this is a long-term strategy that requires little effort in the way of research and analysis. With that said – if you’re looking to trade stock on a short-term basis – it’s well worth considering spread betting shares UK.
In doing so, you can go long or short on your chosen stock, apply leverage of up to 1:5, and your profits will be exempt from capital gains tax. In this guide, we cover the ins and outs of how Spread Betting Shares UK works and how you can get started with a commission-free trade today.
In This Guide
The main concept of spread betting on shares UK can be a bit confusing at first glance – which is why we suggest reading our guide in full. In summary:
In the sections below, we explore how the above spread betting shares UK example works in much more detail.
The main premise with spread betting shares UK is that you need to decide whether you think your chosen stock will increase or decrease in price
When using a shares spread betting UK broker – you can always go long or short on your chosen stock. For example, if you felt that Tesla shares were overvalued – you could instead place a short position. This means that you will make a profit if the stock price declines.
Shares spread betting is a lot different from traditional stock investments. The latter, for example, will see you buy a stock and then keep it in your portfolio for months or years. Along the way, you might collect dividend payments from the respective company.
In the case of spread betting on shares UK – you will be trading on a short-term basis. You might keep a position open for a few days or other instances – a few hours. Either way, you’ll be looking to make small profit margins from ever-changing stock market prices.
In the sections below, we cover the fundamentals of spread betting shares UK in greater detail.
As noted, the main concept when using a spread betting on shares UK site is to determine whether a stock will rise or fall in value. You do, however, need to have a grasp of the underlying metrics of spread betting – as this works in a different way to conventional financial markets.
Let’s start with ownership.
Spread betting shares UK markets are based on financial derivatives. This means that you trade a spread betting stock – you do not own the underlying asset.
It goes without saying that this means you have no shareholder rights – such as receiving dividends or being able to vote in annual general meetings (AGMs). On the contrary, your spread betting trading platform merely allows you to speculate on the future value of the stock.
Spread betting markets move in points.
As you can see, in this example, 1 point movement amounts to 1p.
In another example:
You need to check your chosen shares spread betting UK broker to assess how much one point movement amounts to – as this can and will vary.
So now that you know that shares spread betting UK markets move in points, we now need to explain how stakes work. In a nutshell, you will be staking an amount for each point movement.
Once again, this is why it is important to know how the respective spread betting shares UK is priced. For example, there is a big difference between the market being priced as ‘1 point per 1p movement’ and ‘1 point per £1 movement’. In fact, this difference amounts to a factor of 100x.
We should again make it clear that spread betting shares UK is a short-term form of trading. This is because all markets come with an expiry date. This is what allows the sector to remain free from capital gains tax – as it is viewed as gambling in the eyes of HM Revenue and Customs.
In most cases, day trading platforms hosting spread betting shares markets will offer the following trade durations:
When your spread betting on shares UK market does expire – your trade will be closed by the broker. Any profits or losses that you make from the trade will depend on the price that the position was opened and closed at.
If you’re wondering what the difference is between shares spread betting and traditional stock investments – check out the bullet points below.
If you’re still sitting on fence as to whether or not shares spread betting UK is right for you – below we discuss the core benefits that might see you make the transition.
Many inexperienced investors in the UK are unaware of their tax obligations when buying shares. In fact, you will potentially need to pay tax on three fronts.
Now, all three of the above tax obligations can be alleviated in their entirety by using a shares spread betting UK broker. This means no stamp duty to enter the market and no dividend or capital gains tax on your profits!
As we briefly noted earlier, shares spread betting UK sites allow you to profit from both rising and falling markets. For example, if you think that Babcock shares are overvalued – you simply need to enter a short position.
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.
Or, if you think that Royal Mail shares are undervalued, you’ll be placing a long position. This gives you lots of flexibility as you can target profits irrespective of how the wider stock markets are performing.
UK retail clients can enter spread betting shares positions with leverage of up to 1:5. This means that you can trade with five times the amount you have in your spread betting account.
For example, if you stake £10 per point and your position grows by 7 points – this would ordinarily result in a profit of £70. But, with leverage of 1:5 applied to this shares spread betting UK position – your 370 profit is amplified to £350.
In many ways, investing in shares in the traditional way is relatively straightforward. For example, you can have a diversified basket of blue-chip stocks to your portfolio and leave them sitting idle for many years or even decades.
However, as you will be approaching the shares spread betting UK markets on a short-term basis – you’ll need to have a number of strategies at your disposal. This will ensure that you have clear financial goals and most importantly – an entry and exit strategy on each spread betting position you place.
Below we discuss spread betting on shares strategies UK traders could potentially use, and things to consider for newbies entering this marketplace for the first time.
A popular way to target the shares spread betting UK arena is to focus on earnings reports. This is something that all publicly-listed companies must provide to the general public – which is on a quarterly basis. The earnings report essentially gives us a snap-shot overview of how the company has performed over the past three months.
This will include figures surrounding profits, revenues, debt, and more. Put simply, if the earnings report exceeds market expectations – you might consider entering a long position at your chosen shares spread betting UK broker. On the other hand, if the earnings report does not meet expectations – you’d want to enter a short position.
Another spread betting shares strategy to consider is to look out for company dividend announcements. This is because there is a very strong correlation between the size of the planned dividend yield and the company’s stock price. That is to say – and in theory at least, if the company announces a dividend yield of 2% – the stock price will decline by 2%.
This is because the company is effectively worth 2% less – as it is distributing money to shareholders at 2% of the firm’s current stock price. This means that you can attempt to profit from this by entering a short position at your chosen shares spread betting UK broker once the dividend announcement has been made.
Note: You can view upcoming dividend announcement dates here.
We would also suggest keeping an eye on short-term stock price dips. By this, we mean a stock price decline that is not warranted. Instead, this decline might be an overaction of a recent news development.
As such, you could have headed over to your shares spread betting UK platform and entered a long position to capitalize on this.
You’ll need to open an account with a spread betting shares UK broker before you can start trading. Make sure the broker is regulated by the Financial Conduct Authority, offers your preferred stock market, and offers competitive fees.
Below we discuss a selection of the stock trading platforms in the UK offering spread betting markets.
Pepperstone is another popular spread betting broker that is regulated by the Financial Conduct Authority. You can trade heaps of shares here – all on a commission-free basis if you opt for a Standard Account. Alternatively, if you are a seasoned trader – it’s worth considering the Razar Account. This will get you the tightest spreads in the industry and a competitive commission of just $3.50 per slide.
You can access spread betting on shares UK markets at Pepperstone via MT4, MT5, or cTrade. This is particularly useful if you want to benefit from automated trading or deploy advanced technical indicators. There is no minimum deposit requirement at Pepperstone and the provider accepts Visa, MasterCard, Paypal, and bank transfers. On top of shares, Pepperstone also offers spread betting instruments on commodities, currencies, indices, and if you’re a professional client – cryptocurrencies.
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We are now going to walk you through the process of using a spread betting shares UK platform. This is inclusive of opening an account, depositing funds, and placing your first spread betting position.
Open a free account at a popular spread betting shares platform UK traders are accepted at.
All you need to do in this step is provide some personal information and contact details. All in all, a spread betting shares account should take no more than a few minutes to open.
You will now be prompted to provide a copy of your government-issued ID (passport or driving license). This is part of the KYC (Know Your Customer) process demanded by the Financial Conduct Authority.
To access the live spread betting shares market – you will need to deposit some funds into your spread betting shares account. You can use a debit/credit card or e-wallet to fund your account instantly. When using the aforementioned payment types – the minimum deposit is just £20.
Hover your mouse over the ‘Markets’ button at the top of the page and click on ‘Shares’. You can now find your chosen market by using the filter button. This can be broken down by the location of the market (e.g. UK, US), or the industry the company operates in (e.g.energy, healthcare).
If you already know which shares you want to trade – you can use the search box.
You now need to set up an order.
Finally, confirm the order the platform will execute your spread betting position instantly.
Before we conclude our guide – below we provide some valuable spread betting shares tips that you might want to consider implementing.
In many cases, shares betting brokers UK allow you to trade stocks 24 hours per day. This means that you can spread bet outside of standard market hours.
However, we would suggest avoiding this – as during the evening and weekend volatility is much higher. Additionally, the spreads are also less competitive – meaning that you are paying more to access the market.
Demo accounts are a way to learn how shares spread betting UK works without needing to risk any of your capital. This will usually mirror live market conditions – in terms of pricing, volatility, and liquidity.
Stay in demo mode until you feel ready to start trading with real money and you have the correct risk management tools in place.
It’s also an idea to stick with blue-chip stocks when you first start out in the world of shares spread betting UK. This is because blue-chip stocks are a lot more stable and a lot less volatile.
As such, you’ll want to focus on FTSE 100 shares listed on the London Stock Exchange. Similarly, both the New York Stock Exchange and NASDAQ in the US are home to hundreds of established blue-chip companies.
If you’re interested in trading stocks on a short-term basis – shares spread betting UK is likely to be of interest. This trading arena comes with leverage of 1:5, the option to go long or short on your chosen stock, and all profits are exempt from tax.
We found that Pepperstone is a popular broker in the UK that offers a spread betting shares marketplace. It supports access to over 18 stock exchanges without paying any commissions and the minimum spread betting deposit is just $200.
When you 'spread bet shares' - you are simply looking to predict whether the stock price increases or decrease in the near future. You won't own the actual shares - as financial spread betting instruments are derivatives.
There are two key metrics that will determine how much money you can make from a spread betting on shares trade. Firstly, this will depend on the amount you stake per point. Secondly, your profit will be dictated by how many points the shares moved in your direction. For example, if you staked £10 per point and the shares increased by 20 points - that's a profit of £200.
The risks involved when you spread bet shares are the same as any other trading sector. That is to say, if you speculate on a stock incorrectly - you will lose money.
Yes, in the UK and Ireland, spread betting is tax-free. This means no capital gains tax on your spread betting profits! These favorable tax laws also mean that you won't pay any stamp duty.
There are two minimums you need to look for when choosing a shares spread betting platform. Firstly, you need to check the minimum deposit. At Pepperstone - this is just $200. Secondly, you need to check the minimum stake per point. This is usually just 10p - but do check this before signing up with a broker.
Spread betting brokers in the UK are regulated by the Financial Conduct Authority.
Margin allows you to enter a spread betting position at a greater amount than you have in your trading account. For example, if you are spread betting shares in the UK - the margin requirement is just 20%. This means that you only need to put up one-fifth of the total stake size.
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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