Spread Betting Guide to Trading on Indices for Beginners

LONDON, April 24, 2012 /PRNewswire/ --

Spread betting with City Index enables investors the flexibility of going short and selling markets, enabling them to potentially profit from markets as the fall, as well as going long and potentially profit from rising markets as well. In the following easy-to-follow guide, beginners can learn how they can go short and sell on a trade with a spread betting account.

Spread Betting with City Index

Investors choosing to spread bet with City Index can benefit from:

• No Capital Gains Tax or Stamp Duty*
• Ability to go long and short on a market
• Access to over 12,000 financial markets
• Easy access through its high leverage feature
• Leveraged trading

Tax-Free Trading

At present in the UK, investors can benefit from paying no Capital Gains Tax (CGT) or Stamp Duty on profits made through their spread betting account. However, this is subject to change and investors should seek independent advice if necessary.

Spread Bet Markets

With access to over 12,000 spread betting markets, investors can place trades on the future price movements of shares, indices, currencies and many more - for only a small percentage of the underlying market's price as an initial deposit.

Leverage

As mentioned above, the initial deposit for accessing these markets is only small; with City Index, investors are required to pay typically between 1% and 10% of the underlying market's total value, allowing easy access into the world of trading for many new and part-time traders.

Commission free trading

There is no commission charged for each of your spread bets. However as the name suggests, there is a widened spread, which is one of the chief costs of placing the spread bet.

Spread Betting on Indices

Indices are the most widely traded markets in the world. Investors choosing to spread bet on indices with City Index can benefit from some of the tightest spreads available.

For example, the following markets are available to spread from just 1 point:

• UK 100
• Wall Street
• France 40
• Germany 30

How to Spread Bet on Indices

In the example below, we show you how to spread bet on the Wall Street Daily Funded Trade indices market with a City Index spread betting account.

As an example, the Wall Street Daily Funded Trade (DFT) is available to trade at 12791/12792 (sell price/buy price). 

Following extensive analysis and utilising the range of spread betting education and resources available to you as a City Index client; you expect the Wall Street Index to rally over the coming days.

Subsequently, you decide to go long and open a buy position of £10 per point at 12792. 

Over the coming days, the release of some positive US economic data causes the the Wall Street Index to rally, resulting in City Index's latest price for the Wall Street DFT to be 12808/12809 (sell price/buy price).

At this point you decide to cash in your gains. You do this by selling £10 per point at 12808 (the City Index sell price show above). 

Therefore, you net a tax-free profit* of £160. This is because you bought at 12792 and sold at 12808 with a stake size of £10 per-point. The market moved in your favour 16-points, which multiplied by your stake size of £10 per point, nets you a profit of £160, i.e. (12808-12792) x £10 = £160. 

Alternatively, had the market moved against your buy position and the Wall Street Index has in fact fallen 16-points to 10776; you would have incurred a loss of £160, i.e. (12792-12776)x£10=£160.

Spread Betting Risk

As a leveraged product, the potential for profits and losses from an initial capital outlay are significantly higher than in more conventional forms of trading when spread betting on the financial markets.

Financial spread betting can result in losses exceeding your initial deposit, spread bettors must fully understand the risks and analyse their market fully, prior to placing a trade.

*Spread betting is currently exempt from UK stamp duty and Capital Gains Tax. Tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.