Today we’re chatting with Tom Salmon who is the Managing Director of Spreadex Trading.
He’s been working at Spreadex for 17 years, where he spent 11 years as Head of Trading and in the last 3 years as Managing Director of the whole Spreadex Trading brand.
Welcome Tom, we’re so glad to have you!
I’ve dug into a bit of Google search data before this interview and gathered the most asked questions about spread betting by the UK public.
These interviews aim to have an industry expert explain some of these often confusing financial concepts.
So, let’s start with the basics. Many of Sterling Savvy’s readers are completely new to trading. They know a bit about stocks and shares, ISAs, and pensions, but spread betting, what exactly is that?
What is spread betting?
Tom Salmon: Spread betting very simply is a way for people to speculate on the financial markets (stock indices, shares, commodities, currencies, etc) without taking ownership of the actual underlying asset. The user is taking a bet on whether the price of the asset will go up or down.
Will: OK, that makes sense. To add to what they are, search data suggests people want to know a bit about how they work too.
How does spread betting work?
Tom Salmon: Spread betting tracks the value of an asset and allows the client to go long (buy) if they think the price of the asset will go up and go short (sell) if they think the price of the asset will go down.
The user would then close out their long bet by selling or close out their short bet by buying back. The difference between the buy and the sell price is called the spread and is the provider’s charge.
A good example would be the stock index, the Nasdaq 100 which has a current price of 17588-17590. This means users can sell at 17588 or buy at 17590, the spread is therefore 2 points.
The user would bet a fixed amount per 1 pt movement, if they were based in the UK this would be in GBP. If they were to buy £1 per 1pt movement at 17590 and closed their bet a week later when the index price was 17690-17692 they would make £100 ((17690-17590) * £1).
Will: Interesting, the example has cleared things up, thanks for that. The public also wants to know a bit more specifically about this type of derivative.
What is a spread bet?
Tom Salmon: As touched upon previously a spread bet provides access for people to speculate on the financial markets. The spread relates to the difference between the buy and sell price as clients can both bet an asset will appreciate in value and depreciate in value.
Will: OK, I think that should be crystal clear for readers now. Another highly searched question (around 1,000 people per month) is about how it compares to another common type of trading, CFDs.
What is the difference between spread betting and CFD trading?
Tom Salmon: The products are very similar. Spread bets are unique to the UK as profits from bets in the UK are capital gains tax-free so are historically more popular in the UK than CFDs. CFDs are more commonly traded around the world. Both products are also free of any stamp duty.
Will: I see. People are also looking to find out how spread betting works in tangent with different instruments…
What is spread betting in forex? stocks? options?
Tom Salmon: The principle is the same regardless of the asset class, the user is betting a fixed stake per point movement in an underlying asset. The value of a pt will be specified by the spread betting provider, for example, UK shares 1pt = 1p movement in the share price.
Will: Ah I see, that’s simple enough. Off the back of this, now is probably a good time to answer one of the most searched questions in the UK regarding spread betting…
How to spread bet?
Tom Salmon: Do your research, open an account, read and watch the educational content, and start small!
Will: Love that, nice and concise. It’s all about keeping these concepts digestible. You need a platform to spread bet, what are some things you would advise beginners on looking for in a good platform?
How to choose a spread betting platform?
Tom Salmon: By using a comparison site like Sterling Savvy! Potential clients should be careful to pick an established, regulated provider with good reviews and platform reliability. You are holding money with your spread betting provider so should take the same caution you would with any other financial provider like a bank or an investment platform.
Will: Cheers for the plug! Agreed, it seems security is often one of the most overlooked aspects. Also, it only seems fitting to chat about Spreadex. Tell us about the platform.
What is Spreadex?
Tom Salmon: Spreadex is a sports and financial trading spread betting and CFD business based in the UK in St Albans, established in 1999.
Will: Wow, you guys have been around for a while now.
What is Spreadex’s vision for the UK?
Tom Salmon: Our vision is to serve the UK community (and beyond) who take an interest in the financial markets and want to speculate a portion of their portfolio themselves. We want to provide easy and simple access to the financial markets for clients and react to new markets and product innovations.
Will: Sounds great. Everything has been positive so far, but there must be some drawbacks to spread betting, right? And some things traders need to carefully consider.
What are the risks of spread betting?
Tom Salmon: The risks are that markets can be volatile and people can lose money quickly as a result. New customers should always be mindful of the amount they are staking and the downside should the market move against them.
Will: Good to know. And just to clarify its legality…
Is spread betting legal in the UK? Tax?
Tom Salmon: Spread betting is legal in the UK and profits are free from capital gains tax.
Will: At this point, a reader is probably trying to work out if spread betting is for them, what would you suggest they consider when deciding if spread betting is a suitable trading option?
Who is spread betting good for? Is spread betting good for beginners?
Tom Salmon: As touched upon previously spread betting is suitable for people who are interested in the financial markets and want to speculate a portion of their financial portfolio themselves, whilst always being aware of the risks of doing this. Beginners should always approach their first trades with caution, and make sure they understand the dynamics of the market they are betting on and the size they are doing this in.
Will: Cool, I think that’s really good advice. Let’s start to wrap things up…
What tips would you give to someone looking to get into spread betting?
Tom Salmon: Risk management! Use risk management tools like stop losses, and start small, so look for a provider like Spreadex which allows small minimum stakes.
Will: Awesome, it’s been a pleasure speaking to you today and sharing all your knowledge and expertise. I do have one more question for you…
What does the future hold in the UK for spread betting?
Tom Salmon: It’s always difficult to predict but in the last few years there has been a real increase, particularly in younger generations, of people who have an interest in the financial markets and want to take some ownership of their financial future. Spread betting allows these people a tax-efficient product to put some of their financial pot to work in.
Tom Salmon, Managing Director of Spreadex – LinkedIn
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