CFD & SPREAD BETTING
Contracts for Difference (CFD's) and Spread Betting have grown in popularity in the last decade. There are both positives and negatives to using these products and they are therefore not suitable for everyone.
An important part of our role at Zodiac Partners Ltd is to assess whether or not derivatives are suitable for you. In respect of our Advised and Discretionary Managed services, our Relationship Manager will take time to understand and assess your knowledge & experience, financial suitability and general circumstances to ensure that you fully understand how derivatives work and the risks involved in derivative trading, before deciding if these products are suitable for you.
Why do people use derivatives? From an investor’s point of view, there can be lower charges, tax savings and lower stamp duty (saving 0.5% duty)* also certain products offer Tax free profits (Tax laws could be subject to change).
CFD’s and Spread bets also allow you to utilise leverage (requiring you to deposit just part of the overall cost of your investment). As with all products, there are also cons as the use of derivatives adds risk to your portfolio. It is important to note that the use of leverage can exaggerate losses as well as profits. The situation can arise where you lose more than the initial margin required. It is important that you fully understand the risks involved with leverage and margin products before you attempt to use them in anyway.
We only provide derivative products to those considered to be professional clients under FCA rules.
*UK residents only. This information is based on our understanding of current legislation which may change at any future date. Tax treatment will vary from client to client and hence clients should seek independent tax advice if they are unclear about the tax situation of any of their investment products. The tax status of spread betting as with anything is subject to legislative change at any time.
If you require advice, or would like to talk to a relationship manager to discuss what Zodiac Partners can do for you please contact us.