Research snapshot
A UK reader who searches for options trading meets spread bets and CFDs on options within the first page of results, usually described by the firms that sell them. This page puts the three products side by side: what you actually own, what it costs, who stands behind it, and how each is taxed. It recommends none of them.
What you actually own
| Exchange-traded option | Spread bet on an option | CFD on an option | |
|---|---|---|---|
| The instrument | A contract listed and cleared on an exchange (ICE Futures Europe, or a US exchange cleared by the OCC). The clearing house guarantees both sides. | A bet with the provider on where the option's price will be, so much per point. Over the counter; the provider is your counterparty. | A contract with the provider to pay the difference in the option's price between opening and closing. Over the counter; the provider is your counterparty. |
| Exercise, assignment, delivery | All three are real: an American-style option can be exercised on any business day, a written one can be assigned, and a UK single-stock contract delivers 1,000 shares. | None. The bet is closed at the provider's price or expires against it. Nothing can be exercised or delivered. | None. The CFD is cash-closed. |
| Price | The exchange's bid and offer, set by other participants; on ICE UK single stocks the quotes can be thin, and the library's liquidity gate refuses a spread over about 10% of mid. | The provider's price, derived from the exchange price plus its spread. | The provider's price plus commission. |
| Size | Whole contracts: 100 shares, 1,000 shares, or £10 a point. Below one contract there is nothing. | Any stake per point from the provider's minimum, so far smaller than one listed contract. | Fractions of a contract at some providers. |
| Holding cost | None beyond commission; the option's own time decay is the cost. | Daily-funded bets carry an overnight funding charge; quarterly bets build it into the price. | Overnight financing on long positions. |
| Leverage and close-out | Set by the exchange and the broker's margin; a cash-secured or fully paid position has none. | FCA rules for retail CFDs and CFD-like options (PS19/18): leverage capped between 30:1 and 2:1 by asset, positions closed out when margin falls to 50% of the requirement, and negative balance protection so you cannot owe more than the account. | |
The clearing-house point matters more than it sounds. On an exchange your counterparty is the clearing house; if the firm that introduced you fails, the position survives. On a spread bet or CFD the firm is the other side of every position you hold.
How each is taxed for a UK individual
| Exchange-traded option | Spread bet | CFD | |
|---|---|---|---|
| Gains | Capital Gains Tax: 18% within your unused basic-rate band, 24% above it, after the £3,000 annual exempt amount. A written option's premium is taxed in the year it is granted (TCGA 1992 s.144(1), CG55536). | Not taxed. HMRC's manual at BIM22015 says an individual placing a spread bet "is not normally carrying on a trade" and is "not taxable on the profits". | Capital Gains Tax. HMRC treats retail CFDs as financial futures within TCGA 1992 s.143 (CG56100): every debit and credit on the contract, including financing and dividend adjustments, goes into one gain or loss on closing. |
| Losses | Allowable against gains, if claimed within four years; carried forward. | No relief at all. BIM22015: spread bettors "do not receive relief for their losses". | Allowable against gains, as for options. |
| Stamp duty | 0.5% SDRT on UK shares delivered on exercise or assignment; none on cash-settled index options or US shares. | None: no shares are bought. | None: no shares are bought. |
| Self Assessment | Capital Gains pages, "Other property, assets and gains", computations attached (SA108 page). | Nothing to report. | Capital Gains pages, as a financial future. |
"Tax free" is the whole of the spread-betting pitch, and it is true as far as it goes. What the pitch leaves out is the second row: an option trader who loses £4,000 in a bad year has a loss to set against future gains; a spread bettor who loses £4,000 has nothing. Over a career in which most retail accounts lose, the absence of loss relief is not a footnote. The Level 3 page's line applies: spread betting is an escape from the tax profile of an option, never from its risk profile.
The number the provider has to publish
The FCA requires every firm selling CFDs and spread bets to retail clients to display the percentage of its retail accounts that lose money. On the day this page was checked, 12 September 2026, IG's spread-betting page carried the statement "69% of retail investor accounts lose money when trading spread bets and CFDs with this provider". The figure moves each quarter and differs by firm; the point is that it is published, it is the firm's own number, and it describes the product's leverage and pricing rather than the intelligence of its customers. No exchange publishes an equivalent figure for listed options, which is not the same as the figure being better.
Who protects you if the firm fails
A UK spread-betting or CFD firm is FCA-authorised, so eligible claims against it may be covered by the FSCS up to £85,000 and disputes go to the Financial Ombudsman. That is a genuine advantage over a US-cleared options account, where the protection is SIPC and there is no Ombudsman, as the broker comparison sets out. It is not an advantage over an FCA-authorised options broker such as Interactive Brokers (U.K.) Limited or Saxo, which carry the same cover. And it protects you against the firm's failure, not against the position: negative balance protection stops the account going below zero, and nothing stops it going to zero.
A neutral decision table
| If this describes you | What the comparison says |
|---|---|
| You want to own the shares if assigned, or to be paid for an obligation you would honour | Only an exchange-traded option does this. A spread bet on a put cannot deliver shares and cannot be a cash-secured put in any real sense. |
| Your account is below the size of one listed contract on the underlying you want | A spread bet is the only way to take a smaller position. The library's answer is usually to wait, or to trade a US 100-share contract, rather than to take the same risk against a provider's price. |
| You expect to lose money while learning | Options and CFDs give loss relief; spread bets do not. The tax-free label is worth least to the account that needs it most. |
| You hold for weeks or months | Overnight funding on a spread bet or CFD accumulates; an option's cost is fixed at entry. |
| You want the counterparty to be a clearing house, not the firm | Exchange-traded only. |
| You want FSCS cover and an Ombudsman | Any FCA-authorised route: a UK spread-betting firm, or an FCA-authorised options broker. Not a US broker-dealer. |
| You want the simplest tax admin | Spread betting: nothing to report. Options: the SA108 page is the price of the loss relief. |
None of this is a recommendation. The library teaches exchange-traded options because the risk is written in the contract and cleared by an exchange; the same views can be expressed by the other two products, at a different price, against a different counterparty, with a different tax outcome. Read UK basics for the contract mechanics and the tax and platforms guide for the record-keeping before you choose.
Continue in the options library
- Options hub: all 27 strategies
- Options for beginners: the first 5 things
- Greeks and implied volatility
- Assignment and expiry
- Position sizing and risk
- UK tax and platforms
- Reporting options on SA108
- Strategy planner
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