Financial spread betting is a leveraged way to speculate on whether a market’s price will rise or fall. You do not buy the asset itself. Instead, you choose a stake per point, and your profit or loss is the number of points the price moves in your favour or against you, multiplied by that stake. In the UK, the Financial Conduct Authority (FCA) treats spread bets as high-risk products, and the way they are priced and settled is what most new users need to understand before opening a position.
What a spread bet actually is
The FCA Handbook defines a spread bet as a contract for differences that is a gaming contract under the relevant UK legal definition. In plain terms, you and the provider agree to settle the difference between the price when you open the bet and the price when you close it. HMRC describes the same activity as an individual betting on the future direction of prices or indices, rather than buying and selling financial futures or options.
The term is specific to financial markets. It is not the same as a sports bet placed against a points spread, and it is not a “spread trade” in which an investor buys one security and sells another. This article covers financial spread betting, with a focus on the UK regulatory context.
How the mechanics work
Every spread bet starts with a two-way quote from the provider. The buy price is always slightly higher than the sell price, and the gap between them is the spread. Opening a position follows a fixed sequence:
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- Pick the market, such as a stock index, currency pair or commodity, and look at the provider’s buy and sell prices.
- Decide whether you think the price will rise (you buy) or fall (you sell).
- Choose a stake per point. This sets how much each point of movement is worth to you, in pounds, euros or whichever currency the account uses.
- When you close the bet, the provider measures how many points the price has moved from your opening level and settles the difference against your stake per point.
Before any costs, the core arithmetic is simple: points moved multiplied by stake per point. Actual results can also be affected by financing charges and other product terms, which vary by provider and are not set by the FCA. The sources behind this article do not document any particular provider’s current fee schedule, so check that directly before you trade.
A worked example from HMRC
HMRC illustrates the mechanics with the FTSE 100 at 5400. A provider quotes 5401 to buy and 5399 to sell, and the trader stakes £5 per point. The figures below apply that same stake to hypothetical moves from the opening level. They are arithmetic, not a live quote or a recommendation.
| Move from opening price | Calculation at £5 per point | Result before costs |
|---|---|---|
| 10 points in your favour | 10 × £5 | £50 gain |
| 10 points against you | 10 × £5 | £50 loss |
| 20 points against you | 20 × £5 | £100 loss |
The 2-point gap between the 5401 buy price and the 5399 sell price also matters. If a long position were closed immediately at the sell price, it would show a 2-point loss, or £10 at £5 per point. The market has to move past the spread before the position is in profit.
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Why leverage makes the risk larger
Spread bets are leveraged products. You are exposed to the full movement of the market on a stake that is smaller than the full value of the position, so a modest price move can produce a large gain or loss relative to the money you put up. This is the feature that makes the product risky, not an incidental detail.
The FCA classifies contracts for difference, including spread bets, as high-risk products. Its guidance states: “CFDs are high-risk products, which are not suitable for all retail consumers.” The statement appears on the FCA’s firm guidance on contracts for difference, last updated 13 June 2025.
Protections UK retail clients receive
The FCA’s stated retail protections for these products include:
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- Leverage limits that range from 30:1 down to 2:1, depending on the underlying asset.
- A close-out requirement when your account funds fall to 50% of the margin needed to keep the position open.
- Protection against losing more than the funds in your account.
- Restrictions on cash or other inducements offered to attract clients.
- Provider-specific warnings about the proportion of accounts that lose money.
These protections are UK rules. They describe what regulated firms must do for UK retail clients and do not guarantee that you will avoid losses.
The “82% lost money” figure and what it does not tell you
You will often see a headline claiming that 82% of clients lose money on spread bets or CFDs. The figure comes from an FCA press release dated 6 December 2016 about proposed rules. It reflects a representative sample of CFD firm accounts at that time. It is a historical industry statistic, not a current loss rate for all spread-betting users, and it is not a rate for any single provider.
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Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →Current information is more useful. The FCA Handbook requires firms marketing leveraged spread bets to display a standardised warning containing the provider’s own percentage of retail accounts that lose money. That percentage is calculated on the firm’s relevant retail accounts over the preceding 12 months and refreshed every three months. Read it as a description of what happened to that provider’s clients, not as a forecast for you. It does not predict your result either.
Checking a provider before you deal
Spread betting is offered by firms that must be authorised and permitted by the FCA for the activities they carry out. Before opening an account, use the FCA Firm Checker to confirm:
- The exact legal entity you would be contracting with, not just the brand name on the website.
- That the entity is authorised and holds the permissions for the product you want to trade.
- Which jurisdiction the contract falls under, and which client classification and protections apply to your account.
- The provider’s current losing-account warning and the terms of leverage, margin and close-out.
The FCA warns that scam firms may claim to be UK-based or FCA-authorised, may use names similar to legitimate firms, and may pressure people to act quickly or promise unrealistic returns. Any of those signs is a reason to stop and check the register before depositing money.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Tax and where these rules apply
Do not assume that spread-betting profits are tax-free. The HMRC material cited for this article is an example in its Capital Gains Manual. It illustrates how spread bets work but does not settle how tax applies to you, to a particular activity, or to a specific jurisdiction and set of circumstances. Check current HMRC guidance or take qualified tax advice before relying on any tax treatment.
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The FCA rules discussed here apply in the UK context. They do not establish that a given provider is available to residents of other countries, and they should not be assumed to provide equivalent safeguards elsewhere.
Questions to answer before you open a position
- What is the full cost of the trade, including the spread and any financing or other charges set out in the provider’s terms?
- What stake per point can you afford to lose on a move against you of several times your normal daily fluctuation?
- At what account level would the provider close your position, and how much margin would you need to hold to avoid that?
- Have you confirmed the provider’s FCA authorisation and the legal entity you would contract with?
Because spread betting involves leverage, a losing position can change quickly. Treat the answers to these questions as the minimum you need before risking money on a price movement.
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