Spread Betting vs Contract for Difference (CFD)

Compare CFD trading and spread betting and see which suits your requirements. If you’re experienced in the financial markets, both spread betting and CFD trading can bring variety and range to your portfolio. You can see a full comparison below.

What are the similarities between Spread Betting and Contract for Difference?

Both products are derivatives, meaning that you are not the owner of the underlying stock, currency or commoditie, but a contract related to the underlying asset. The terminology is slightly different for CFD’s and Spread Betting, but both offer the same degree of trading with leverage and the amount of risk you take in trading CFD’s or Spread Betting.spread betting versus contract for difference cfd

With both Spread Betting and Contract for Difference you can trade with margin. All you need to trade is to deposit the same amount of money you wish to invest in a position. This is just a percentage of the value of the underlying asset.
The value of both products will rise or fall met the underlying value and you can hold the position for a long or a short period of time. You choose.

The underlying asset will not be yours. Some Contract for Difference brokers offer trading CFD’s for free. This means you don’t have to pay a commission per trade or per account, usually the spread (difference between the buy and the sell price) is how the broker earns her money.

What are the differences between Spread Betting and Contract for Difference?

The prices of the spread betting assets are determined by the broker and based on the market prices. The price you see is usually not the price in real time.

Spread betting companies place theor own ‘take it – or leave it’ prices, exactly like a bookmaker would do in gambling, where in trading CFD you are the onw to determine the purchase price of the asset. On the other hand, a CFD Broker will always put your order between the buy and sell price.

The differences in the price of trading CFD’s and Spread betting can be hige. The rate of the Contract for Difference is normally spoken closest to the market price than the rate of the Spread betting asset.

Another important difference is the one you are dealing with. When you open a contract with Contract for Difference, you have an agreement with another trader and the broker earns money by the difference in the buy and sell price and charging an interest rate for overnight positions.

 

Which is Best for Me?

Spread Betting is for you if..

  • You like to control the sice of the deal
  • You like to deal shares in smaller sizes
  • You like tax free trading
  • You like fixed expiry rates
  • You don’t like to pay commissions

CFD are for you if..

  • You like to use direct market access
  • You like to trade with leverage
  • You don’t like to pay commissions
  • You like the idea of being in full control of the portfolio
  • You like to earn dividend