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How do CFDs compare to Spread Bets
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Last update : September 2010
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| CFDs and spread bets are similar in that they both offer margin but apart from that there are some major yet subtle differences, the main ones being -
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- Profits on CFDs are taxable whereas with Spread Bets they're tax-free
- Losses on CFDs can be offset against capital gains, not allowed with spread bets
- Commissions are charged on CFDs, it's commission free with spread bets
- The dealing price is not the same. With CFDs you deal off the same price as if trading the underlying shares, with spread bets you deal off your broker's price which is based on the cash price - Important, there are 2 types of CFD broker
- Spread bets always have an expiry date, CFDs never expire - More information on Spread Betting
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| The above assumes using a Direct Market Access (DMA) CFD broker and not a commission free broker - explanation. I don't advise commission free as these brokers offer their clients their own prices rather than the same dealing price as the underlying share - and that's a major disadvantage. |
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Read more in the CFD section:
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