You incur your loss when you close the trade

All spread bets have an expiry date. With conventional share dealing, you crystallise your loss only when you sell the shares, no expiry date.

If spread betting on equities, you do not get dividends because you are betting on a price movement rather than buying the shares. You get the benefit of the dividend through the bid-offer spread.

The spread is different to the cash market spread so you have to factor in a certain increase or decrease in the price before you are in profit.

Losses on bets cannot be offset against capital gains you make either on other spread bets or from your conventional share investments.

You can lose more than your initial deposit or capital. The margin trading involved means that while potential profits are magnified, potential losses are also magnified. Except for trades with stop losses. With ordinary share trading, you cannot lose more than the amount you invested in the shares. With spread betting, there is no such limit.

Spread betting is not ideal for long-term investing. Costs are incurred each time a spread bet is ‘rolled’ over or extended to a new expiry date. All spread bets have a definite expiry date. If you wish to run your trade beyond the expiry date you must roll your position over from one quarter to the next.

Spread betting is provided by Admiral Markets and London Capital Group.

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