While it’s true that you have to speculate to accumulate, and also true that you will only accumulate a significant sum if you ‘play with meaningful stakes’, there are some very good reasons for sometimes (if not always) spread betting with small stakes.
One reason might be to establish the smallest possible position initially so as to test a trading hypothesis, with a view to pyramiding to a more meaningful stake if the trade goes the right way. Another reason might be to diversify your risk by establishing ten separate £1-per-point positions in ten different 100p-per-share stocks rather than establishing a single £10-per-point position in just one of those stocks.
The good news is that, on the whole, spread betting companies do not mandate the high minimum £££-per-point stake sizes that they did a few years ago. It is perfectly possible to place spreadbets at just £1-per-point, and in some cases to place even lower fractional bets, but this ability to play with small stakes varies between spread betting platforms and providers. Here are some rough guides to spread betting with small stakes on various platforms, which are correct at the time of writing.
It can be somewhat difficult to tell at times what the minimum bet sizes are with different providers particularly as they operate on different basis point per stake size. For instance, IG Index use the full point for the S&P 500 index whereas Capital Spreads uses the decimal point. So a £20 bet with IG Index is the equivalent as a £2 bet with Capital Spreads. Same with Nasdaq and Gold.
London Capital Group and Friends
The spread betting “home” brands of the London Capital Group — which include Capital Spreads and InterTrader — mandate a minimum stake size of £1-per-point. You can’t bet less than this, and you are not forced to bet more. Also, this minimum bet size applies whether you are trading a 10p-per-share equity or a four-digit stock index (or any other market).
The same minimum bet size of £1-per-point applies to some other spread betting providers that run on essentially the same trading technology, for example ETX Capital.
On newly-opened accounts, IG Index allows spread bettors to “practice” using very small stakes as low as £0.1-per-point. This minimum is gradually increased to £0.2-per-point, and then to £0.5-per-point until it reaches £1-per-point. On a mature account, the £1-per-point minimum stake applies to most if not all markets (including individual equities) that have good liquidity, but some of the more obscure equities — which in any case cannot be traded on many other spread betting platforms — are subject to a higher minimum stake size. For example, at the time of writing:
Allied Irish Bank must be traded at a minimum of £3-per-point.
Camco International Ltd must be traded at a minimum of £5-per-point.
Office2Office Plc must be traded at a minimum of £5-per-point.
It is interesting to note that at the time this sample was taken, the Wall Street index could be traded at a minimum of £1-per-point, a FTSE 100 bet required a minimum stake of £2-per-point, and the FTSE Mid 250 index was subject to a lower £0.5-per-point minimum bet.
On the criteria of minimum bet sizes, SpreadEx used to compare poorly with many of the other spread betting companies due to its previous high minimum bet sizes on even some well-known equities. A more recent cursory inspection of the available markets suggests that most if not all of those markets are now available for trading at £1-per-point.
Unlike the spread betting companies that force you to enter a stake size in whole pounds, thereby mandating a minimum stake of £1-per-point, the City Index web interface allows you to enter fractional sub-£1-per-point bets. For example, you can trade the UK 100 index or an equity like Aberdeen Asset Management at £0.5-per-point.
This ability to place fractional bets may be particularly useful to those spread bettors hoping to trade high-price foreign shares like Apple (priced at 57236) and Google (priced at 59602). The minimum bet sizes of 0.1 on these stocks should at least allow you to reduce your risk by a factor of 10.
As an alternative to City Index, Ayondo Markets also allows fractional bets on many markets, which is particularly useful to those spread bettors who wish to place trades on 5-digit indices (like the Wall Street index) or on commodities / metals like gold. At the time of writing, the minimum stakes for these instruments are 0.11 and 0.13 respectively.
These days we can expect most spread betting companies to make most markets available for trading at £1-per-point. There may be higher minimum bet sizes when trading some obscure markets on some platforms, and conversely it may be possible to place fractional bets on other platforms.
One thing is clear: the days of £5-per-point (and even higher) minimum stakes on major markets are over. And that’s a good thing for those spread bettors who want to test the waters or diversify their risks.