In this, the bet is on whether the outcome will be above or below a particular spread. Before we talk about the differences, it is important to have a look at the similarities:
1. In case of spread betting and CFD, stamp duty is not required. Both ways of investment are free from stamp duty.
2. Another similarity between spread betting and CFD Trading is that in both the cases, the trader does not buy the shares he has been trading for. As the trader is not buying any assets, freebet he does not hold any voting rights.
3. Last similarity is that in both the cases, the trader can earn in a situation when market is falling as well. This means, that in both the cases, trader has double chances to win. One, when market is rising and two, even when market is falling.
Looking at the above mentioned similarities, few people might get confused between the two terms. However, let us look at the points of difference between the two:
1. In case of spread betting, the trader enjoys commission free betting. However, CFD trading is not commission free.
2. Contract for Difference Traders get dividend wherever relevant. However, spread traders do not get any kind of dividend.
3. Spread bets are based on fixed ownership however CFD Traders get flexibility in this case.
4. Spread betting is exempt from Income Tax; however earnings from CFD Trading are not income tax free.
CFD Trading is currently available in United Kingdom, Netherlands, Germany, Switzerland, Italy, Singapore, South Africa, Australia, Canada, New Zealand, Sweden, France, Ireland, Japan and Spain. Hong Kong has plans to start this trade as well. Spread betting is more popular in United Kingdom only. Looking at the above mentioned similarities and differences, it is clear that to distinguish between spread betting and CFD Trading; a person should have clear knowledge about both the terms. Both of them involve risk. A lot of young and new investors initially opt for spread betting. With experience and market knowledge people can earn fortunes through CFD Trading as well. There is no fixed time duration for this type of Trading. The client can call it off, when he thinks he has earned enough profits from it. A client can also call it off if he has lost lot of money and does not want to continue with it. With so much of flexibility and convenience involved, no doubt that Contract for Difference has earned place in investor’s hearts. Both of them are good sources of extra money for few and for the rest main sores of income.