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Does eToro offer spread betting? Alternatives for 2022

Gustavo Gomes| Updated July 18th, 2022

eToro is the leading social investing platform in the world. The platform is suitable for retail investors and professionals, and offers a wide range of stocks, among other instruments. Since you are reading this article, there is probably one financial instrument you are interested in: spread betting.

As we will explain below, spread betting is a derivative that uses leverage to magnify the profit and loss of the investment. Beforehand, we must mention that it is a risky investment allowed only in a few countries, such as the UK. The instrument is not allowed in the US.

You certainly want to know if you can find spread betting on eToro. Therefore, in the sections below, we will explain what the instrument is, mention its pros and cons, explore if you can trade it on eToro, and provide alternatives for trading it.

Does eToro offer spread betting accounts?

No, eToro does not offer spread betting services. Among the many instruments available on the platform, spread betting is not one of the options. The company does not mention plans to include the financial instrument into their platform.

One alternate instrument and the only derivative you will find in eToro is the contract for difference (CFD). These are also derivative contracts where investors try to profit from the price variation of an asset without owning it. The investor receives the difference between the price when the contract is opened and when the position is closed. 

There are a few differences between the CFD and a spread betting contract: the latter has a fixed expiration date, set when the bet is placed. Generally, there are commissions and fees for trading CFDs. Most importantly, the P&L of the CFD is calculated by taking the price at the closing of the contract and subtracting it to the initial price plus commissions. In opposition, the P&L of the spread bet is the change in the price times the amount of cash placed in the bet. While the profit of spread betting depends on the size of the bet, the profit of CFDs depends on the price variation of the asset.

If you feel attracted by these features, please note that according to eToro, 78% of retail investor accounts lose money when trading CFDs due to their complexity and the leverage factor, combined with the general lack of experience.

Etoro Alternatives for spread betting

FxPro

FX and derivatives broker founded in 2006. The company is regulated by top regulators: the FCA, CySEC, FSCA, and SCB. Among the derivatives available, you can spread bet over 430 underlying instruments with no commission. To do so, you must have a FxPro EDGE account, which is only available for UK residents.

Capital.com

CFD broker founded in 2016, regulated by the FCA, CySEC, ASIC, and the FSA. There is a $20 minimum deposit, and the trading platform is user-friendly. The only products available are stocks, ETFs, CFDs, and spread betting. The derivatives are only available for UK clients.

IG

The company was founded in 1974 and is considered the world’s first spread betting firm. The trading platform offers an extensive range of financial instruments, which include forex, stocks, commodities, cryptocurrencies, bonds, ETFs, derivatives, and others. There is no minimum deposit. Although fees for trading forex, stocks, and CFD are high, there are no commissions for spread betting. The company is regulated by multiple top-tier regulators, such as the FCA, FINMA, BaFin, ASIC, MAS, and FSA, among a few others.

Pepperstone

Online brokerage firm founded in 2010 with a platform that offers forex, stocks, indices, commodities, cryptocurrencies and spread betting. The company is regulated by the FCA, offers protection for UK customers but does not accept US clients. Their costs are considered competitive and they offer a medium-sized set of financial instruments.

Pros and Cons of Spread Betting

Pros

  • You are not limited to betting on the rise of prices. If you expect the price of a stock to fall, you can also bet on it to fall and profit from it.
  • You will be able to gain full exposure to the asset without acquiring its ownership and paying the full price. This is positive because your initial investment will be lower than it would be if you were to acquire the asset. 
  • Spread betting is considered gambling in many jurisdictions, including the UK, where the instrument is used the most. Since it is a speculative bet, it is tax-effective, and it will not be not taxable as capital gain or income.
  • Generally, spread betting does not have a commission or dealing fees. Only the spread is charged from the client.

Cons

  • This type of financial instrument is highly speculative and extremely risky. Its leverage effect magnifies volatility and potential losses, which can be unlimited without a stop loss position. 
  • Losses incurred may not be tax-deductible for the same reasons that the investment may be tax-effective.
  • Since you cannot acquire the ownership of the underlying asset, spread betting does not conceive voting rights or similar ones.

Key points to consider when choosing a spread betting broker

If you want to look for spread betting services, we have provided you a few alternatives to start, and now we will help you listing a few of the factors that you should consider when choosing the right broker for you:

  • Costs: Generally, the spread betting accounts are free and the broker profits from the spread. So one thing to consider is the difference between the bid and the offer. To make a profit, you should look for a low spread. Low liquidity in the market can increase this difference, but the broker can increase it to profit more from the transactions.
  • Regulation: It is important to assess if the broker you use is regulated by a top-tier regulator such as the FCA (Financial Conduct Authority).
  • Deposit protection: You can also assess if the broker can secure your funds if it goes bankrupt, providing you more protection.
  • Trading offers: Since the underlying asset will determine the P&L of your investment, it is important to trade with a broker with a diverse set of financial instruments to offer.
  • Customer support: Eventually, you will have problems using your trading platform. For that purpose, it is important to find a broker with good customer service that can quickly solve your issues. 

The bottom line

Besides offering many types of instruments for your investments, eToro does not offer spread betting services. They also do not mention any plan to include it in their platform. Currently, the only derivative available in eToro is the CFD. But if you are looking for spread betting service providers, there is no need to worry, there are many alternatives, especially in the UK, where the instrument is more common.

Spread betting may be very profitable due to its leverage effect. But for the same reasons that it can be profitable, the losses incurred by the instrument are limitless, making it very risky, it should be used very carefully.

If you are interested in spread betting, we hope this article helps you with your doubts and provides you with some information about it. Note that this article is for informational purposes and should not be seen as financial advice. Remember that you should always do your research, and due diligence, especially when dealing with such a risky instrument. We wish you good luck with your investments, and please leave your questions below!

Other FAQs

What is eToro, and what is spread betting?

eToro is a social trading platform with diverse financial instruments for your investments. One of its main features is the possibility to copy other traders, which allows inexperienced traders to mimic the investments of experienced ones. Although eToro lets you invest in stocks, ETFs, cryptocurrencies, commodities, and CFDs (Contract for Difference), it does not provide spread betting services.

If you are not familiar with this financial instrument, we can help you. Spread betting is a derivative: a contract whose value comes from an underlying asset, like currencies or stocks. Derivatives are frequently used to hedge positions or gain leverage and speculate about the price of the underlying asset.

In a nutshell, spread betting is a contract that allows investors to bet on the price movement, both up and down, of an underlying asset. At the end of the contract, the profit or loss is calculated by taking the change in the price of the asset (initial price – final price) and multiplying it by the amount of cash that the investor placed in the bet. 

When spread betting, you do not acquire the ownership of the underlying asset, and leverage your position. This makes this type of investment risky, since you will gain full market exposure to the underlying asset, while investing only a fraction of the price, magnifying your profit and loss. 

To illustrate this explanation, imagine the following: let’s say that you think that a stock that currently costs $100 is overvalued. You believe that its price will fall. Then you decide to bet $10 that the price will fall below $100. If, at the closing of the contract, it reaches $95, you will close the contract with the profit of $50 {($100 – $95) * $10}. On the other hand, if the price goes up to $105, you will close the contract with a loss of $50 {($100 – $105) * $10}.

Gustavo Gomes
Contributor

Gustavo has professional experience in banking law, commercial law, consumer's law and financial instruments law and is currently pursuing a Master's Degree in Law and Financial Markets

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