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Spread Betting on Shares |
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Where to Spread Bet on Shares
You can spread bet on Shares with the following companies:
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| FTSE 100 shares (spread size) |
0.10% |
0.10% |
0.10% |
0.10% |
0.075% |
0.10% |
0.10% |
| FTSE 100 shares (min stake) |
£1 |
£1 |
£1 |
£1 |
£1 |
£0.50 |
£1 |
| Shares (more available) |
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Shares spread betting may also be available with other companies - notes.
Introduction to Shares Spread Betting
In many ways, share trading is one of the most elementary aspects of all financial trading and investing.
The ability to trade shares is long established. Recently however it has become possible to place spread bets on the future value of shares. For example: speculating on the price of a share in a few minutes, a few hours, a few days or even a few months.
Spread betting offers a few key advantages compared to traditional share trading:
- Transactions are free of stamp duty*
- Profits are free from capital gains tax and income tax*
- Trading on margin allows you to leverage your funds. This means you do not need to lock up large amounts of capital when you trade. This naturally increases your upside. Note though that this increases your risk and, therefore, your potential downside. You can lose more than your initial investment
- An investor can go either long or short. Ie, you can bet on the market to going up or down. Financial spread betting is one of the easiest ways to ‘short’ a share
- This form of trading allows easy access to a range of International Shares. For example, you can spread bet on shares listed in the USA, UK, Ireland, Germany, South Africa, Australia, Sweden, Japan, etc.
- There are generally no broker’s fees or commissions
- You can generally trade a variety of other asset classes from the same spread betting account. For example you can speculate on Stock Market Indices, Forex and Commodities
How to Spread Bet on Shares
As an example, let's say that you are considering financial spread betting on HSBC, you look on a spread betting website, e.g. FinancialSpreads, and get the real time price:
This is what you need to know about how it works.
| Spread Trading Market | HSBC Rolling Daily |
| The Spread | 543.9p - 544.7p |
| How the Spread Works | Now you can speculate on the HSBC Rolling Daily market moving:
 Above 544.7p, or
 Below 543.9p
This is a 'Rolling Daily' trade and so there is no closing date. If you decide not to close your position and the trading session ends then your trade will roll over into the next trading day.
Note that if a trade is rolled over then you will either receive or be charged interest for overnight financing based upon whether you are speculating on the market to move higher or lower.
To learn more also see Rolling Spread Bets. |
| Units Traded | Spread betting trades on the HSBC market are priced in £x per penny.
Where a penny is 1p of the UK equity's price movement.
E.g. if HSBC moves 35p then you would win/lose 35 multiples of your stake. |
| Trade Size | You work out how much you would like to stake per penny, e.g. £2 per penny, £5 per penny, £20 per penny etc. |
| Quick Staking Example | As an example, if you decided on a stake of £4 per penny and HSBC moves by 23p, you would lose/win £4 per penny x 23p = £92. |
Spread Betting Example | Going Long of HSBC
Spread betting on the UK equity to increase
| You Now Select Whether to Buy or Sell |
HSBC to move:
Above 544.7p? or
Below 543.9p?
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| Let’s Say You Want to Buy | Above 544.7p |
| You Choose Your Stake Size, Let's Say You Opt For | £5 per penny |
| What Happens Next? |
- You make a profit of £5 for each penny HSBC moves higher than 544.7p
- You will lose £5 for every penny HSBC moves lower than 544.7p
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| If You Buy a Market Your Trading Profits/Losses = | (Closing Price - Opening Price) x stake per penny |
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| Situation 1 | HSBC moves higher and the market moves to 561.0p - 561.8p. |
| Time to Lock in Your Profit? | At this point, you may decide to let your trade run or close it in order to take your profit. For this example, you choose to settle your position and sell at 561.0p. |
| Your Trading Profits/Losses = | (Closing Price - Opening Price) x stake per penny |
| (561.0p - 544.7p) x £5 per penny |
| 16.3p x £5 per penny |
| Your Trading Profits/Losses = | £81.50 profit |
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| Situation 2 | HSBC falls and the spread betting market adjusts and moves to 525.6p - 526.4p. |
| Close and Restrict Your Loss? | At this point, you may choose to leave your trade open or close it, i.e. close your spread bet and limit your loss. In this instance you choose to settle your position by selling the market at 525.6p. |
| Your Trading Profits/Losses = | (Closing Price - Opening Price) x stake per penny |
| (525.6p - 544.7p) x £5 per penny |
| -19.1p x £5 per penny |
| Your Trading Profits/Losses = | -£95.50 loss |
Fully Worked Financial Spread Betting Example | Taking a Bearish View of HSBC
Spread betting on the UK equity to decrease in value
| You Now Work Out Whether to Buy or Sell |
HSBC to push:
Above 544.7p? or
Below 543.9p?
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| Let's Say You Choose to Go Short | Below 543.9p |
| You Decide Your Stake, Let's Assume You Opt For | £10 per penny |
| So Now What Happens? |
- You will lose £10 for every penny HSBC rises higher than 543.9p
- You make a profit of £10 for every penny HSBC goes lower than 543.9p
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| If You Are Spread Betting on a Market to Go Down Your Trading Profits/Losses = | (Opening Price - Closing Price) x stake per penny |
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| Situation 3 | HSBC goes lower and the HSBC market is revised to 532.5p - 533.3p. |
| Take a Profit? | You can choose to keep your bet open or close it, i.e. close your spread bet to lock in your profit. For this example, you do choose to close your bet by buying the market at 533.3p. |
| Your Trading Profits/Losses = | (Opening Price - Closing Price) x stake per penny |
| (543.9p - 533.3p) x £10 per penny |
| 10.6p x £10 per penny |
| Your Trading Profits/Losses = | £106.00 profit |
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| Situation 4 | HSBC increases and the financial spread betting market is revised and changes to 555.5p - 556.3p. |
| Close and Limit the Loss? | You could opt to let your bet run or close it, i.e. close your trade and limit your loss. For this example, you decide to close your position by buying at 556.3p. |
| Your P&L = | (Opening Price - Closing Price) x stake per penny |
| (543.9p - 556.3p) x £10 per penny |
| -12.4p x £10 per penny |
| Your P&L = | -£124.00 loss |
HSBC Notes:
- Price as per FinancialSpreads, 2 November 2011
- Many spread betting companies will also let you speculate on HSBC in euros/penny and dollars/penny
- In addition, financial spread betting also lets you access a large variety of other assets, for more information see:
Where to Trade Shares Tax Free*
You can speculate on Shares tax free* with the following spread betting companies:
UK Shares Spread Betting Guides
Individual shares spread betting guides with worked trading examples for each UK firm:
US Shares Spread Betting Guides
Individual shares spread betting guides with worked examples for US stocks and shares:
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Financial Spreads - tax free* trading on over 2,500 spread betting markets. With a Financial Spreads Account you can trade commission free, 24 hours a day on stock market indices, forex, shares commodities and...read review » Financial Spreads.
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With financial spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital. Please familiarise yourself with the risks that are involved and before trading, ensure that financial spread betting matches your investment objectives. Seek independent advice where necessary.
Spread Betting on Shares - edited by MJ, 22 February 2012.
For related pages and articles see:
Spread Betting on Shares - guide last updated: 22 February 2012
Spread Betting on Shares - the spread betting guide to trading Shares, including where to spread bet on Shares, how to spread bet on Shares and the best way to ...more: Spread Betting on Shares.
Shares Spread Betting - guide last updated: 31 January 2012
Shares Spread Betting: a guide to shares spread betting reviewing costs, risk management, tax-free* trading, dividends with shares spread betting and ...more: Shares Spread Betting.
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With spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital so please familiarise yourself with the risks that are involved and, before trading, ensure that spread betting matches your investment objectives. Seek independent advice where necessary.
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* Based on current UK tax law. Tax law may change and can differ depending on your personal circumstances.
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