Are there fees for spread betting?
Spread betting is an efficient way to trade on the price movement of a wide range of financial assets, without having to fully buy or sell them. In this post, we’ll look at the costs involved in spread betting.
Spread betting is a financial derivative that allows participants to speculate on the movement of a financial market without the actual purchase of the underlying asset.
Since you’re not actually buying a share or futures contract, the cost of spread betting is less restrictive – you can stake as little as £1 per point.
Spread betting is an act of prediction. You speculate whether the market price for a wide range of assets – including indices, forex, commodities and shares – will rise or fall. Your profit or loss is determined by the direction and degree of the change.
In addition to providing a relatively inexpensive way to access any market, spread betting typically carries fewer fees than most other trades. Here’s how spread betting fees are broken down.
What does it cost to spread bet?
Trading costs matter to anyone who decides to speculate on financial markets. Though some forms of trading require execution or commission fees, spread betting (depending on your broker) can be free of such charges.
For instance, with Intertrader, the only cost to traders is the dealing spread. The spread is the difference between the buy price and the sell price of the financial instrument on which you’re speculating. It is, in effect, the cost to participate in trading that market.
For example, if you buy (go long on) an index that has a spread of four points, the market would need to rise four points before you could make a profit.
Commodities, indices, forex and shares all have different spreads, which can be as low as 0.6 on the most popular forex pairs. Generally speaking, the smaller or tighter the spread, the smaller the ‘cost’.
Costs to execute a spread bet
Some trades made through a broker come with execution costs. Similar to commission fees, these are charges the broker levies for making the trade on your behalf.
Whether or not you’re charged a fee to spread bet, and the value of that charge, depends on your broker. When you spread bet with Intertrader, for example, there are absolutely no execution fees. The only charge is in the dealing spread.
If you’d like to hold an undated trading position overnight or over the weekend, Intertrader will make adjustments to your account reflecting the interest-cost of holding your position. This daily adjustment will be a debit for long positions or a credit for short positions.
Do I have to pay taxes on spread betting profits?
Spread betting is free from another sort of fee, which is less often considered when you place a trade. While losses on unsuccessful trades stick in the mind, it’s easy to forget about the eventual tax implications of successful trades.
Under UK law, any profits made from spread betting are exempt from capital gains tax and stamp duty. Because of this tax exemption, you may be willing to adjust your trading investment or budget, but you should note that tax treatment depends on your individual income and circumstances and could change in the future.
Published: 8 August 2018
You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.