Spread Betting | IG Index |Shares | FAQs

Here are answers to some of the questions we are most commonly asked about spread betting on shares. If you can't find what you're looking for here, please refer to the Dealing Handbook.

How does spread betting on shares work?

Spread betting on shares is the tax-free* alternative to conventional dealing in shares trading.

When you spread bet, you never physically buy or sell the shares, you simply bet – in terms of £ per point – on the direction in which you think the share price will move.

This means that you 'buy' if you think the price of a share (let's say Barclays) is set to rise, and 'sell' if you think the price will drop. If you bet £10 a point you will win £10 for each penny that Barclays moves in your favour. This is the equivalent of holding a position in 1000 Barclays shares; if the price went up one penny you would make 1000 shares x £0.01 price move = £10 profit. Similarly, betting £5 a point gives you exposure equivalent to 500 shares, £25 a point to 2500 shares, and so on.

The degree to which you are correct in your prediction, and the extent to which you bet, will dictate how much you win or lose.

For a better understanding of how spread betting on shares works take a look at our detailed examples.

How does it differ from conventional share dealing?

Apart from being tax-free, the main difference is that shares spread betting is done on a leveraged basis. This means that for the same amount of money, you receive greater exposure to share prices than you would if you had to pay for the shares outright. Instead, to open your position you put up a deposit (a fraction of the contract value), which can be as low as 5%.

As shares spread betting is leveraged it can result in dramatic gains, but equally it can result in losses that exceed your initial deposit. Without good risk management it is possible to make significant losses over a short period of time, which is why we provide a number of risk management tools such as Guaranteed Stops.

What does 'short-selling' shares involve?

Short-selling is an expression which describes the process of a trader attempting to profit from the fall of an individual share price. To be successful the trader must first sell the share (open a position), at a higher price than they are able to buy it back later to close the position.

Short-selling is an option that used to be available only to institutional investors. However, with spread betting you can potentially profit from a falling share price as easily as from a rising one.

If you think the price of a particular share is set to fall, you simply 'sell' at our current quote, derived from the market price of the share. This will give you a 'short' position in your chosen share price, and you will be able to close that position by 'buying' at our quote later on.

Take a look at our Selling short example to find out more.

What are the charges?

The main charge is the dealing spread. For daily bets on shares that are part of a major market index (like the FTSE 100), this is 0.1% of the value of the transaction. There is also a rollover charge that reflects the cost of financing the position that you hold having only put down a fraction of the value as a deposit. The financing is charged at the risk-free (or LIBOR) rate plus 2.5% per annum.

If you are short-selling there may be a daily charge for us borrowing the shares to sell short for the period the position is open.

Finally, we apply a charge for Guaranteed Stops. Non-guaranteed Stops and Trailing Stops are free of charge. There are no other charges.

For further details, see our Dealing spreads.

Why spread bet on shares with IG Index?

• Greater choice including over 1500 UK shares plus thousands more international equities
• Tighter spreads thanks to our unique technology, which means we can offer you the tightest spreads available
• Guaranteed Stops on over 7000 individual shares
• Tiered deposit rates means we can offer the most attractive rates on liquid stock positions
• Professional-level resources to help inform your trading
• Real-time charting as part of a comprehensive technical analysis package

Learn more about spread betting with our free online seminars