Why do spread bets expire?

When you begin spread betting, each spread bet has an expiry date. Technically speaking, spread betting is betting because you never actually make a purchase of the assets you are spread betting upon. For example, if you are spread betting on shares, you do not purchase the shares themselves and you can even spread bet on sporting events like Wimbledon or the Tour de France as mentioned in previous articles.

Spread betting is therefore subject to betting laws and not investment laws, even though like many investments it falls under the regulation of the FSA (Financial Services Authority) in the UK.

Hence, it is a legal requirement for all spread bets to have an expiry date, at which point the profit or loss will be realised.  

There are advantages to this. Just like normal betting bookmakers, spread betting companies do not charge a commission but make their money on the spread, and you do not pay taxes or stamp duty on your gains. This is precisely why many people choose spread trading as it is also known.

Like many financial investments, you can increase your chances of making money by learning your chosen market before spread betting but unusually you can make money spread betting when a market decreases in value.