Spread bet

A spread bet is very similar to a contract for difference (CFD), but is legally very different (so its tax treatment is usually very different), and the cost structure of trading is very different.

A spread bet is just what it says: a bet. However, rather than having a fixed stake, the amount paid depends on the value of a number. A financial spread bet (the commonest type) has a values that depends on the price of a security, or a commodity, or index, an exchange rate, or an interest rate, or any other financial number.

By far the biggest difference between a spread bet and a CFD is the tax treatment.

The cost structure of trading is also likely to be different. The cost of a spread bet lies entirely in the spread, whereas buying or selling a CFD, especially an exchange traded CFD, also usually incur a broker's commission. Spread bets also do not incurr finance charges. Most spread bets expire on fixed days and cannot be closed early.

Transactions spread bets are regulated, in the UK, by the FSA.

Daily rolling spread bets

Daily rolling spread bets are even more similar to CFDs. They roll over each day, so they may be closed on any day the holder chooses. There are financing charges for each day, usually made on the same basis as those for CFDs.

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