Know the difference of spread betting with CFDs and binary options. Below is a detailed comparison to know which form of trading is ideal for you.
With spread betting, the possible profits are exempted from stamp duty and capital gains taxes in the UK. With CFD and binary options, profits are exempted from stamp duty to pay because you do not own the underlying asset but these are still subject to capital gains tax.
For most licensed brokerages in the UK and Ireland, financial regulators cover the licenses of investment companies that are offering CFD and spread betting services. Binary options trading however is not although there are a few that were able to include this with their license.
Traders from the UK and Ireland can only spread bet. CFD and binary options are available worldwide but not to all countries. Please check the terms and conditions of your brokerage to know which countries they support.
Going Long or Short
With spread betting, CFD and binary options, you can make a profit regardless of the price movement. You can go long or short when market prices are rising and go short when prices are falling.
Profit and loss calculation
When you spread bet, the profit or loss is the difference between the price at which you opened and the price at which you closed the postions multipled by your stake. When you trade CFDs, the profit or loss is the difference between the price at which you opened and the price at which you closed the positions multiplied by the number of CFD units you purchased. With binary options, the profit is based on the payout rate that is provided by your broker while the losses is the entire amount that you traded. Some brokerages however have refunds usually ranging from 1% to 15%. AvaTrade reviews 2018 will further explain detailed information about the profitability of trading CFDs.
Trading on margin
Both spread betting and CFD are financial leveraged products which would require deposits that are only a fraction of the full value of the trade to be able to open a position. Binary options however do not allow trading on margin so what you deposit is the same amount that you can trade.
With spread betting and binary options, there are usually no commission charges. Trading CFDs however deduct commissions upon execution of the order aside from the spread.