Spread betting is a leveraged financial instrument where traders speculate on price movements without owning underlying assets, with profits or losses determined by the accuracy of price direction predictions multiplied by stake amounts. Popular in the UK, spread betting offers tax advantages and flexible position sizing but carries high risk due to leverage.

Spread betting providers quote bid-offer spreads for various markets, with traders buying if expecting price increases or selling if expecting decreases. Position sizes are determined by stake per point of price movement. Understanding spread betting mechanics helps assess this alternative to traditional trading while managing leverage risks.

Real-world example: A trader buys £10 per point on FTSE 100 at 7,500, profiting £200 if the index rises to 7,520 (20 points × £10) but losing £300 if it falls to 7,470, demonstrating leverage effects on returns.