Spread betting involves speculating on the price movements of financial instruments, by placing a bet on whether the price will go up or down, and by how much. The profit or loss is determined by how accurate the trader’s guess about the size of the movement is. The asset could be stocks, indices, currencies or commodities.

The spread is the difference between the bid price (the price at which the trader can sell) and the ask price (the price at which the trader can buy). The trader takes out a spread bet on whether the price of the underlying asset will go above or below the spread.

The bigger the difference between the spread at the time the bet was placed and the actual closing price, the bigger the profit the trader will make it they guess right. However, if the guess is wrong then the trader’s loss is equal to the difference between the spread at the time of the bet and the actual closing price.

Spread betting involves a high degree of risk, so traders should consider their risk tolerance before speculating.

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Disclosure: 80% of retail CFD accounts lose money. Plus500 does not offer spread betting, social trading, or bonds. Furthermore, hedging is strictly prohibited on the Plus500 CFD platform.