An introduction to spreads

Financial spread betting allows you to speculate on the price of a stock, share, FX pair or commodity without actually having to buy or sell it.

A spread bet allows you to predict where the market will be at a fixed point in the future. When you decide to take on a spread bet, you will be quoted a bid (selling) price and an offer (buying) price. The difference between these two prices is the spread.

For example, if you believe that the market will rise, then you can accept the bid price and "buy" at £10 per point. If the market does rise then you will receive £10 for every point that it is above the bid price you were quoted.

Alternatively, you can bet that the market will fall. In this case, you would accept the offer price and "sell", for example at £10 per point. If the market falls, you get £10 for every point that it is below the offer price you were quoted.

The closer that the bid and offer prices are, the less the market will need to move before you make a profit.

Spread betting does not incur any fees, commissions or stamp duty - all you have to pay for is our spread.

It is worth remembering that, should the market move against you, you would incur losses and you should therefore only speculate with money you can afford to lose.

As spread betting is leveraged and losses can be considerable, MF Global Markets strongly recommends making use of its comprehensive and flexible risk management tools.

There are several risk management tools available from MF Global Markets to help restrict the levels of losses that can be sustained on your account.

These include:

• Stop orders
• Limit orders
• One-cancels-the-other orders
• Contingent orders

Under UK law, a spread betting transaction is classified as a bet, which means that all profits generated are free from UK taxation*.

*Tax treatment depends on individual circumstances and may be subject to change in future.