Share trading and spread betting when seen with an overview provide the same picture wherein both allow you to trade in shares with the ultimate goal of making profit. But when examined minutely one gets to understand the basic differences between the two entities. I think it is very important to highlight these differences if we were to really understand the working of these two separate entities- share trading and spread betting.

• It is generally seen that financial spread betting companies are more interested in taking bets on indices and various stock exchanges rather than on individual stocks and shares. On the other hand traditional share trading deals with individual shares of companies. This limitation limits the scope for a customer who is spread betting. Now there is a reason for me to say so the reason being that when an individual trades for shares of a company then he is in a better position to make informed predictions regarding that company based on its recent performances, its assets and the market sentiments that surrounds the company’s working environment. But when one deals with stock indexes and exchanges then these predictions and judgments do not work. One can only think of getting a holistic view of the market condition based on the interest rates and other such functions.
• Spread betting offers the unique advantage of providing you with tax free profits. The profits that you earn using spread betting are free from income tax, capital gain tax and any other form of stamp duty. The reason being that here you are at no point of time having physical control over the asset that you are betting on. On the other hand no such relief is provided to you when you carry out share trading the traditional way.
• When you carry out spread betting you have the unique advantage of not worrying about the long and short positions which you might have to decide if you opt for traditional share trading. In spread betting there is simply no difference in playing long or playing short as here in one case you will want the prices to rise while in the other a fall in the price will be beneficial. What I mean when I say short selling is the phenomenon where in you can exploit a condition where you can foresee the prices of a stock falling in the near future. Taking a short selling stance or opting for a PUT option will help you derive the maximum benefit from such a situation.
• As discussed previously that when you trade using spread betting you can free your gains from various taxes and cuts but it has to be remembered that the financial spread betting company which carries out the spread betting for you on your behalf does include its charges and commission in the spread itself which you use for betting purposes. Therefore you do have to bear the transaction charges involved in spread betting.
• Also another difference between these two is that while trading shares using the traditional trading approach can be carried on as long as you desire it is not so in the case of spread betting. Spread betting comes with a fixed tenure and expires on a pre decided date.