Investment Management and Stockbroking Services

Specialised Trading

• CFD
• Spread betting

Spread betting
A cost-effective investment tool for sophisticated investors

Introduction

Rowan Dartington provides clear, effective and thoroughly researched advice to investors looking for intelligent solutions to their financial requirements.

We offer trading solutions to suit every client’s requirements.

As independent stockbrokers, we provide access to the widest range of investment options available from across the whole market. This includes access to cost-effective investment tools particularly suitable for sophisticated investors.

What is spread betting?

Spread betting offers you the opportunity to trade equities, indices, currencies and commodities and profit from a rising or falling market whilst initially only paying a fraction of the total cost.

When you spread bet you never actually buy or sell the physical asset, for example Vodafone shares or crude oil, you bet on the direction in which you think the underlying asset will move.

The spread is the difference between the buying and the selling price, you place a buy bet if you think that market is going to rise or a sell bet if you think the market is going to fall. The profit, or loss, you make depends on the movement of the market relative to your bet.

With Rowan Dartington you can spread bet on individual shares, commodities, currencies and across share based indices. All spread betting is carried out through ETX Capital.

Risk factors

Spread betting is high risk and only suitable for experienced investors. It may not be suitable for everyone, so please ensure that you fully understand the risks involved by speaking to your Investment Executive. Spread betting can result in losses that exceed your initial deposit.

What are the benefits?
Trade long or short	You can spread bet on any share or market we quote. This enables you to speculate or hedge an existing portfolio and potentially profit from both rising and falling markets.
No stamp duty	As you don’t actually buy the physical share, you don’t have to pay stamp duty, so saving 0.5% when compared to a traditional share deal.
No fees	There are no fees or commissions to pay - the only charge is the spread.
Tax efficient	In spread betting a transaction is classified as a bet. Therefore, under current tax legislation all profits are free from any UK taxation. Please note that tax laws are subject to change.
Risks managed	To help you reduce your investment risk, we offer flexible risk management tools as well as advice on strategies such as guaranteed/ non-guaranteed stop losses.

How spread betting works
	How it can work in practice
1. Know your spread
We will quote you two prices for any underlying instrument, for example shares, indices or currencies. The lower ‘selling’ price is called the bid and the higher ‘buying’ price is called the offer. The difference between these is called the spread.	We quote 299-300 for Barclays. 299 is the sell/bid price 300 is the buy/offer price
2. Decide which way you want to bet
If you think prices will rise you place a buy bet and if you think prices will fall you place a sell bet.	If you think prices will rise you bet that the Barclays share price will move higher than 300. If you think prices will fall you bet that the Barclays share price will move lower than 299.
3. Decide how much you want to bet per point
The movement of the underlying share or index is measured in points. For every point up or down you can choose to bet an amount.	You decide to bet £20 per point at 300. With this bet you will make £20 for every point that the bid price (the price at which you can close the position) rises above 300 and lose £20 for every point the bid price falls below 299.
4. Closing your bet and calculating your return
To close the bet you simply place an opposite bet for the same amount per point.	After one week the Barclays price has risen to 368-369 and you decide to take your profit. You close your bet by ‘selling’ £20/point at 368, the bid price. You have made (368 – 300) x £20 = £1,360. And with no tax to pay! Of course, had the price moved against you, you could have lost more than your initial deposit.

Comparing costs

Using the example outlined opposite, we can show that your initial outlay to open your spread bet is much less than that required to purchase conventional shares which give you the same return.

Your £20/point bet produces a result equivalent to buying 2,000 Barclays shares. With a conventional share holding at this level, each penny movement in the price would also be worth £20 to you.

However, for the same return the cost of buying conventional shares is much more.

Cost of buying Barclays shares	Cost to place equivalent spread bet
2,000 x 300p = £6,000	5% deposit calculated as £20 x 300 = £6,000 x 5% = £300 Therefore the margin requirement is £300.

Please be aware that your maximum potential loss is the same
whether you spread bet or buy the equivalent shares and margin
rates vary on different stocks and markets.

However with spread betting, you pay:

• No commission
• No broker fees
• No capital gains tax*
• No stamp duty*

The only charge is the spread.

Where can I find out more?

Your Rowan Dartington Investment Executive will be happy to speak to you about spread betting. Click here to contact your local branch.

* Under current tax legislation all profits are free from any UK taxation. Please note that tax laws are subject to change.

We’re here for you