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Does Trading 212 offer spread betting? Alternatives for 2022

Gustavo Gomes| Updated: July 8, 2022

Trading 212 is a fintech company founded in 2004 in the UK famous for its trading platform with commission-free stocks, ETFs and CFDs. The company is regulated by the FCA, CySEC and FSC. Its platform is known in Europe for its simplicity and its program where you can get a free share worth up to €100.

Spread betting is a derivative that uses leverage to magnify the profit and loss of the investment. It is very popular in the UK, where Trading 212 is based, due to the tax benefits on profits. It is crucial to mention though that it is a risky investment, allowed only in a few countries, and not permitted in the US.

If you are reading this article, you are probably interested in spread betting and want to know if you can trade it in Trading 212. So, in the sections below, we will explain  the instrument, mention its pros and cons, explore if you can trade it on Trading 212, and provide alternatives for doing it.

Does Trading 212 offer spread betting?

No, Trading 212 does not offer spread betting services. In Trading 212 you can only trade stocks, ETFs, and CFDs (which include forex, stocks, ETFs, index, and commodities). Trading 212 is a company from the UK, a country whose residents can benefit from tax-effective spread betting. Therefore, we can find in their community forum discussions about the subject and even clients’ requests to implement it into the platform. However, there is no official announcement indicating the intention to implement the service.

Although you cannot use spread betting services in Trading 212, you can trade CFDs on the platform, which is somewhat similar. CFDs are 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 want to start trading CFDs, please note that 70% of retail investor accounts lose money when trading CFDs in Trading 212. This is mostly due to the complexity and the leverage factor of the instrument, combined with the general lack of experience.

Trading 212 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. 

Other FAQs

What is Trading 212, and what is spread betting?

Trading 212 is an online broker that allows you to invest in commission-free stocks and ETFs. Its platform has features to diversify your investments by giving you access to fractional shares through an investment pie. You can also set up an auto investment tool to automate your investments according to your needs and preferences.

Trading 212 operates in most countries and has a user-friendly platform. But one of the issues we can point out is its lack of financial instruments for you to trade. The only derivative you can invest in the platform is the CFD (contract for difference). Trading 212 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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