The Main Advantages of Spread Betting 1. At this time the only tax due on spread betting is betting duty and that is currently absorbed by the bookmaker or bookrunner. No Stamp Duty is payable and there are no capital gains tax charges. So today the punter pays no tax. Of course the tax situation may change in which case "spread betting explained" will immediately update the relevant changes. 2. No direct commission or brokerage fees are charged. 3. Spread betting enables people to go short allowing people to protect part or all of their investment portfolios if they want to. This facility is particularly useful for people holding a large number of a single share (they may have options, be a director, owner etc.) and they want to protect their holding or part of it. Also a person's tax position may not allow them to sell the actual shares and a spread bet could protect their position. 4. By enabling short positions spread betting allows you to make money not only in rising markets but also in falling markets. 5. Spread betting allows you to take small bets as well as large and there is no different spread quoted for a smaller size bet. Therefore small positions are not penalised like they can be in cash markets. 6. With spread betting in many cases it is possible to deal when the traditional markets are closed. 7. Spread betting enables you to get very fast quotes by phone or on-line systems and gives instant execution (this is not always the case in the traditional markets particularly for small positions). 8. Relatively low margin requirements normally allow good leverage for larger positions. In most cases only between 7.5% and 10% is required as margin to be deposited with the bookmaker or bookrunner.   Disadvantages of Spread Betting 1. The spread is not normally guaranteed and can change if the market becomes more volatile although in normal market conditions spreads are usually constant. 2. If a person trades before the expiry date they will basically be paying the spread for a second time so adding to the underlying cost of the trade (in a way paying the bookmaker or bookrunner twice for dealing). 3. Spread trading gives no rights to the investor. No voting rights no dividends etc. 4. Spread betting can be extremely volatile and many bets unless protected by a "guaranteed stop" can result in extremely large losses if events go against you. 5. As the only tax applying to spread betting at this time is betting duty (absorbed by the bookmaker or bookrunner) any losses incurred cannot be offset against tax.     Copyright 2000 everythingexplained.com for spreadbettingexplained.com