How do Spread Betting firms make money?

When you begin to Spread Bet on a regular basis, it is always a smart idea to open accounts with several Spread Betting firms so that you are able to take advantage of the best spreads that are available across the market.

Spread Betting firms basically make their money out of the spread between the bid and offer prices. The larger the spread, the more money the spread betting firms will be making, so it make sense that you should always look for the tightest spreads possible.

Here’s an example of how much difference the size of a spread can make -

Let’s say that Marks and Spencer(M&S) are trading at 148/155 with City Index and Capital spreads are quoting a price of 150/156. Although, it may be cheaper to Buy M&S at City Index (155), you will receive less when you come to sell, as the spread is wider i.e 7pts vs 6 pts at Capital Spreads.

It pays to check the spread when entering into a sizeable trade as this could enhance the profit on the trade. If you are a regular trader, you will find that not shopping around for the tightest spreads will end up costing you over time. People shop around to get the best car or home insurance quote, this is no different!

There is also the added advantage that many of the Spread Betting firms will offer an attractive sign up bonus when you open an account with them. These bonuses can often exceed £200 per account, so that definitely gives you an incentive to keep your options open and try different trading platforms.