Let's assume you sell the shares short by using spread bets and the market does decline. Your shares will lose money, lets say £1,500, but the short spread bets will make money of around £1,500 as well. Net result, a perfect hedge where no money was made nor lost.

But there's a tax advantage to the above - the spread bet profits are tax-free.

The disadvantage however is if the market rallies. Then the shares would make money but the spread bets would lose. So overall the combined trades would lose you money because the spread bet losses are not allowed to be offset by capital gains.

Overall I don't think spread betting is the best product to use if you want to hedge stockmarket risk, options are not either for these reasons.

So if spread bets and options are not that suited to hedging stockmarket risk what is? In my opinion it's CFDs (Contracts for Difference).