Like any other financial instrument spread betting too has its own share of advantages and disadvantages. A complete insight into these pros and cons will help us get a complete judgment on it. To consider spread betting as a good viable option for us it should convey to us stronger advantages than the disadvantages. I will assist you in understanding exactly this. For easy understanding and convenience the advantages and disadvantages have been listed by me as follows:

Advantages:

• The gains accumulated from spread betting are tax free. The profit you earn here is free from capital gain tax, income taxes or any form of stamp duty charges. This is not the case when you carry out trading of shares through a traditional stock broker. There your profits have to bear the capital gain tax on them. The stamp duty too is exempted on spread betting gains as there is no physical exchange of shares in spread betting.
• The concept of spread betting is surely much simpler to understand and follow as against the concept of futures, CFD’s and derivatives.
• The high leverage associated with spread betting ensures that you land up with high returns.
• All the prices associated with spread betting are included in the spread and therefore the entire spread betting process turns out to be commission free.
• Most of the spread bet markets are open for 24 hours and thereby give you the convenience and freedom to carry on with your trading even when the traditional markets have shut down for the day.
• There is no need of huge capital investment from your side to start spread betting. You can start betting with as little an amount as you can afford to invest at that point of time.
• Most of the spread betting firms will offer you a credit account to carry on with your betting depending on your financial standing and experience in the field of spread betting.
• Since all trades involved here are between the client and the spread betting company therefore there is no loss in time and all the orders are executed immediately.
• Spread betting gives you the opportunity to make money even if the market is rising or falling. This means that there is always an opportunity available for you to catch hold of and make some quick profit.
• With spread betting you can carry out trading in different markets from a single account itself.
• Trading via spread betting involves very less paperwork and is much simpler to execute and perform. Also, the online trading platforms being offered for spread betting are better advanced as compared to those used for traditional trading.
• With spread betting you can also avail the benefit of new variations and products on the existing products being offered by it.

Disadvantages:

• With spread betting you can end up losing much more than you invested initially.
• Spread betting has been considered to be a betting activity by the FSA.
• The spread that the bookmarker adjusts in the spread turns out to be on a higher scale when compared to the commission paid to a traditional broker.
• The funding cost involved with spread betting is charged on the entire position that you decide to take.
• Since spread betting does not entail you with physical ownership of the instrument therefore you are deprived of the benefits which you could have otherwise got if you had owned it. For example dividends from shares etc.
• The spread bets come with a pre defined deadline and cannot be carried out once the expiry date passes by.
• Since spread bets can be rolled over or extended for a longer duration at additional costs therefore the trading costs involved with spread betting keep on increasing with time.