How does a spread bet work?

Once you choose a financial instrument you wish to trade, you have to select whether you wish to ‘buy’ or ‘sell’ the instrument. If you think the value of the instrument will increase then you buy the spread bet. But if you think the price will fall you sell the spread bet.

To close your spread bet you simply place an offsetting bet, so if you have a long spread betting position you would need to place a sell order to close or partially close that position. The more the spread bet price moves in your direction the greater the profit you will generate. Adversely, the more the spread bet price moves against your direction, the greater the loss will be.

Are financial spread bets suitable for everyone to trade?​

No. It involves a high level of risk due to the impact of leverage.

Financial spread betters should ensure they have appropriate knowledge or understanding of leverage products and only trade with funds they can afford to lose – research the instruments you wish to trade beforehand and become accustomed to a trading platform via a demo environment before commencing live trading.

For more experienced traders, spread bets can be utilised for hedging purposes of investments such as equities, and are a capital efficient way to trade actively.