It’s called financial spread betting or spread betting but what actually does “Spread” betting mean. Well if you are familiar with buying stocks and shares you will understand that there is a buy(ask) and a sell(bid) price. The difference between the two is called the spread.


The way spread betting works is by having this “Spread” a little larger. For example, BP is trading on the stock market at (Sell)395-400(buy). Therefore the spread is 5 points. A spread betting firm will quote the same instrument with a slightly larger spread for example (Sell)393.5-401.5(Buy). Therefore the spread is 8 points. This extra three points spread is one of the ways the spread betting firm makes their money.


Using the above example if you were to make ten trades in BP at £1 per point each time this would mean the spread betting firm would make 3 points per trade. So 3 * £1(per point) * 10(trades) = £30. The spread betting firm will have made £30 from you making ten trades irrespective of if you make a profit, loss or breakeven.
NB: The above example is completely made up. It is not representative of the real spreads that spread betting firms offer. The spreads different firms offer vary greatly depending on the instrument being traded and the firm you are using.


For the latest minumum spreads on offer check my spread betting comparison charts.

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