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What is spread betting and how does it work? An in-depth guide

Published on: 08/10/2021 | Modified on: 27/03/2023

Spread betting is a popular form of derivative trading that enables investors to speculate on the price movements of financial assets, such as indices, forex, commodities, and shares, without owning the underlying asset. Profits are tax-free in the UK^.

Spread betting is margin-based, allowing traders to deposit a set percentage of the full value of a trade, and therefore offers greater exposure to the markets compared with traditional investing. Trading with margin (or leverage) also amplifies both profits and losses equally.


  • Spread betting is tax free^ (available only in the UK and Ireland)
  • You don’t own the underlying asset; instead you speculate on the direction you think the market will go
  • The spread represents the difference between the buy and sell prices
  • You can trade on both sides of the market and go long (‘buy’) or short (‘sell’) depending on your view
  • As spread betting is a leveraged product, you only need to deposit a percentage of the full trade value. This offers greater exposure to the markets compared with traditional investing. Your profits and losses are amplified based on the full value of the trade
  • You can spread bet outside of standard trading hours on some instruments, even when the underlying market is closed

How does spread betting work?

When spread betting on the financial markets, you don't buy or sell the underlying instrument (for example a physical share or raw material). Instead, you place a bet on a derivative based on whether you expect the price of the underlying instrument to go up or down.

If you expect the value of an asset to rise, you could open a long (buy) position. Conversely, if you expect the asset to fall in value, you could take a short (sell) position. You will make a profit or loss on any bet based on whether or not the market moves in your chosen direction.

What is Spread Betting?

What is a stake?

You buy or sell an amount per point of movement in the instrument you’re trading (for example, £1 per point). This is known as your stake size. A larger stake size would also result in a higher margin requirement, and greater exposure to your chosen instrument.

This means that for every point that the price of the instrument moves in your favour, you will gain multiples of your stake times the number of points by which the instrument price has moved. On the other hand, you will lose multiples of your stake for every point the price moves against you. Please note that losses are based on the full notional value of the position, so you may lose more than the initial margin required to open the trade.

See our spread betting examples for more information.

What is a spread?

The difference between the buy (bid) price and sell (ask) price is referred to as the spread in trading. This is where a broker's commission is made, as the buy price will be slightly higher and the sell price slightly lower than the underlying market price.

The spread is a key cost for traders to consider. Depending on how expensive, volatile, and liquid an instrument is, the spread can fluctuate, along with its price and the trading volume.

Say for example, Apple is trading at a buy (bid) price of 141.10 and a sell (ask) price of 141.14, the spread would be 4.0. If your stake was £1 per point, you would pay £4 in spread.

Bet duration

Many spread betting instruments don’t have a fixed duration, and can be closed at any time during the instrument’s trading hours. At CMC Markets, these are called ‘cash’ instruments. How long you hold your spread betting position largely depends on your trading strategy, the market you’re trading, and the type of spread bet you open (‘cash’ or ‘forward’).

A key part of your trading strategy is managing your risk, and so where you place your stop-loss and take-profit order levels, along with the volatility of the instrument you’re trading, will be important factors in determining the duration of your spread bet. Trading strategies range from scalping, which is a very short-term form of trading, through to a much longer-term style of trading. However, spread betting is often considered as short term, compared with traditional longer-term investing, where a stock portfolio, for example, may be held for several years.

The type of trade you open is also an important consideration. Spread bets on ‘cash’ instruments can normally be kept open for as long as you want to hold them – there is a daily overnight holding cost which will be applied to your account as long as you keep the bet open. Spread bets on ‘forward’ instruments, on the other hand, have a set expiry date, usually within the next few months. Holding costs are not applied to these type of spread bets. Read more about futures and spread betting on forward instruments

Bet size

The bet size is another term for the amount of money you want to bet per point of movement on the instrument you’re trading. The minimum bet size – or stake – for indices, forex, and commodities is £0.10 per point. The bigger the stake, the greater your exposure to the instrument and market you're trading.

How is bet size calculated? 

You can choose your bet size, or stake, as long as it meets the minimum requirement for the instrument you’re trading. Your profit or loss is calculated as the difference between the opening and closing price of the instrument, multiplied by the value of your stake.

Margin explained

When you spread bet, you put down an initial deposit – the margin – to open a position. The initial funding required to open the position is a percentage of the value of the trade. If the price of the instrument you trade goes up, the margin required will increase; if the price falls, the margin will decrease.

Should your open position start to incur losses not covered by the initial deposit, you’ll get a margin call notification, which means you’ll need to add funds to your trading account, or risk your position being closed

The margin rate varies depending on the market you trade, and ranges from 3.34% of the trade size on forex, to 20% for shares, shares baskets and ETFs. View our margin rates

Leverage explained

Spread betting is a leveraged product, which allows you to get full exposure to the market without having to pay the total underlying market cost upfront. Instead, you only need to deposit a percentage (or margin) of the full value of the trade to open a position. Trading with leverage magnifies your returns and losses, as they’re based on the full value of the trade.

Common margin rates for indices start at 5%. This means that you only have to deposit 5% of the instrument's full value to open a position. This is equivalent to a 20:1 leverage ratio.

Share trading examples

It’s important to keep up to date with the latest economic data and news, because real-world events can often influence market prices. As an example, let's look at the UK government’s help to buy housing scheme.

Many believed this scheme would boost UK homebuilders' profitability. Let's say you agreed and decided to place a buy spread bet on Barratt Developments at £10 per point just before the market closed.

In our example, Barratt Developments is trading at 255 / 256 (where 255 is the sell price and 256 is the buy price). The spread is 1 point.

Let's assume that you opened a long position at £10 per point because you thought the price of Barratt Developments would go up. For every point that Barratt’s share price moved up or down, you would have netted a profit or loss multiplied by your stake amount.

Example 1: winning bet 

Your prediction was correct and Barratt Developments’ stock then rose to 306 / 307. You decide to close your buy bet by selling at 306 (the current sell price).

The price has moved 50 points (306 sell price - 256 initial buy price) in your favour. Multiply this by your stake of £10 to calculate your profit, which is £500.

Example 2: losing bet

Unfortunately, your prediction was wrong, and the price of Barratt Developments’ stock dropped over the next month to 206 / 207. You feel that the price is likely to continue dropping, so to limit your losses you decide to sell at 206 (the current sell price) to close the bet.

The price has moved 50 points (256 – 206) against you. Multiply this by your stake of £10 to calculate your loss, which is £500.

In this straightforward example, we haven’t placed any stop-loss orders, including guaranteed stop losses, which could have limited the loss.

Overnight holding costs apply to ‘cash’ positions held overnight, and could reduce the overall profit, or increase an overall loss, depending on market movement.

Start spread betting with CMC Markets now 

How to spread bet in our platform

Learn how to spread bet by following the steps below.

  1. Open a demo account or live account. Accounts can be opened via our website or spread betting app. Deposit funds if you have chosen to open a live account.
  2. Research financial instruments to trade. Browse our news and analysis section, and check the insights, market calendar and chart forum platform modules. Live account holders can also access Reuters news and Morningstar fundamental analysis for inspiration.
  3. Decide on your move. Once you've carried out your research, are comfortable with your trading strategy, and are ready to get started, choose to 'buy' your selected instrument if you think the price will rise, or 'sell' if you think the price will fall.
  4. Manage your risk with a market entry and exit strategy. Based on your trading plan, enter the market, and add risk-mitigation strategies, like stop-loss and take-profit orders.
  5. Enter your stake size and place your trade. Be aware of the full trade value and don't forget to add stop-loss and take-profit orders.
  6. Monitor your trade. Keep track of the open trade on your mobile or PC, and close the position as defined in your trading plan.

Which spread betting strategies are best for you?

A spread betting strategy is a predetermined plan that helps you to define your market entry and exit points, and any accompanying risk-management conditions, such as stop-losses. When utilising a trading plan as part of your wider trading strategy, you aim to create a process in which you can monitor and aim to forecast trade outcomes.

A trading strategy template can help you to define a set of rules to follow for every trade, helping to remove emotions, or irrational responses. This keeps consistency within your trades and can help improve your trading mindset. Learn more about trading strategies

Considerations before you trade

Traders utilise a variety of different methods and strategies suited to their own trading style. There are, however, some common tips to bear in mind:

  • Create a well-researched trading plan and stick to your strategy

  • Be aware of the macro environment, relevant economic data and company announcements

  • Consider market news and analysis as part of your research

  • Test your ideas and strategies with virtual funds using a demo account

  • Effectively managing your risk can help you to cut any losses short, while letting winning trades run

  • Don't let emotions affect your trading strategy

  • Avoid recommendations and tips from unreliable sources, such as internet forums

Spread betting FAQs

Can you make a profit spread betting?

Spread betting can be profitable, although there is a high element of risk involved. Most experienced traders will follow a systematic trading plan, utilising both fundamental and technical analysis, along with careful risk-management practices. It’s important to practise and refine your trading strategy, which you can do risk-free with a demo account.

In which direction can I trade?

You can either open a long (buy) position if you think the value of an instrument will rise, or a short (sell) position if you think the market will fall. This allows you to take advantage of both sides of the market, which is a key difference compared with traditional investing.

How is profit and loss calculated?

Profit and loss are calculated by multiplying your original stake size, for example £10 per point, by the number of points the instrument’s price has moved, either in your favour or against you. Both profit and loss are based on the full value of the leveraged position, and not just your original deposit amount. View our spread betting examples

Can I hedge with spread bets?

Traders can offset potentially negative price movments by opening multiple positions on the same instrument, which is known as a hedging strategy. For example, if you’re holding a long position on a stock which is declining in value, you could open a parallel short bet on the stock to offset any loss from the original position. It’s important to remember that while you have a long and short spread bet open on the same instrument, you won’t actually make a profit or a loss, but will still pay applicable costs. As a result, this is likely to be a short-term strategy.

What order types are available?

As well as market orders, which open or close a trade at the current market price, limit and stop-entry orders allow you to specify a price level at which you want to trigger a trade and enter the market. You can apply stop-loss orders to specify the price at which your position will be closed out, if the market should move against you. You can also set up take-profit orders, specifying a predetermined target level to secure a profit from your trades. Learn more about our execution types


Is there a minimum deposit for spread betting?

There’s no minimum deposit amount to create an account with us. However, you won’t be able to place a trade until there are sufficient funds in your spread betting account to cover your margin. View our funding FAQs for more information.

What are the most popular markets for spread betting?

You can spread bet on more than 12,000 instruments through our award-winning platform and app. Some of our most popular markets include indices, such as the UK 100, Germany 30, and US NDAQ 100; forex, including EUR/USD and GBP/USD; and commodities, like Gold and Natural Gas. You can also speculate on thousands of global shares, over 1,000 ETFs, plus treasuries, and our exclusive forex indices and share baskets. 

What are the risks to consider?

Trading with leverage means any profit or loss you make is magnified to reflect the full value of the trade, so it’s important to bear this in mind. You risk losing the funds you’ve deposited, but as a retail client, you can’t lose more than the value of your account due to negative balance protection (this protection doesn’t apply to professional clients).

If your account balance is no longer sufficient to cover the margin required to keep your current positions open, your account might be subject to a close-out (liquidation). This means that all or some of your open positions might be automatically closed once your account balance falls below the close-out level. Learn more about liquidations​ and margin calls

Financial markets can be volatile, and highly volatile markets can result in your positions being subject to gapping or slippage. For example, a market might not reopen at the same price it closed at when the last trading day ended, if you’re holding a position overnight. The instrument you’re trading could be suddenly affected by a breaking economic or political event, or when a position is kept open over the weekend.

These factors mean it’s important that you monitor your positions carefully, and use appropriate risk-management tools.

*310,363 active clients, CMC Markets financial year 2021-2022. Active clients represent those individual clients who have traded with or held CFD or spread bet positions, or who traded on the stockbroking platform, on at least one occasion during the financial year.
**No.1 Web Platform, ForexBrokers.com Awards 2023; No.1 Most Currency Pairs, ForexBrokers.com Awards 2023; No.1 Platform Technology, ForexBrokers.com Awards 2022; Best Mobile Trading Platform, ADVFN International Financial Awards 2022.
^Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.
Associated costs with spread betting may affect your return.
Except in some circumstances which may be outside of our control.

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