Futures and spread bets give traders access to many of the same markets, from equity indices and currencies to commodities and government bonds. On a price chart, the two can look almost interchangeable. Underneath that chart, however, they are built very differently, and those differences shape everything from position size to the eventual tax bill.
How Each Contract Is Built
The first difference appears before a single trade is placed.
A futures contract is standardised by the exchange that lists it. The exchange fixes the underlying market, the contract multiplier, the minimum price increment and the expiry schedule. Traders decide how many contracts to hold, but they cannot reshape the contract to fit their capital.
CME Group’s equity index range shows this clearly. Over two decades of market growth, the notional value of a single E-mini S&P 500 contract roughly tripled. In 2019 the exchange responded with the Micro E-mini, set at one-tenth of the size: $5 per index point against $50. Even so, exposure still moves in fixed steps.
That rigidity is deliberate. Because every contract is identical, thousands of participants can trade them through a central exchange, which concentrates liquidity and supports transparent price discovery.
A spread bet works differently. Rather than buying an exchange-listed contract, the trader agrees a stake per point with a provider and profits or loses according to how far the market moves. No underlying asset changes hands.
This allows much finer control over position size, because the stake can be matched to the trader’s capital and appetite for risk rather than to a multiplier set by the exchange. For UK residents, OANDA offers this format through a spread betting sub-account covering indices, commodities, metals, forex and bonds, with the option to go long or short on each.
Expiry and the Mechanics of Rolling
Expiry marks the second structural divide.
Exchange-traded futures have a fixed lifespan. CME’s Micro E-mini equity index futures follow the standard quarterly cycle: they expire on the third Friday of March, June, September and December and settle in cash against the underlying index.
An investor who wants exposure beyond that date must close the expiring contract and open a later one, a process known as rolling. The next contract rarely trades at the same price. Interest rates, expected dividends, storage costs and supply expectations all affect the gap between one delivery month and the next, so each roll carries its own economics.
Spread bets generally make expiry far less hands-on, although the detail varies by market. Many index spread bets are undated. They can stay open for as long as the account holds sufficient margin, with overnight financing charged or credited instead of an expiry.
Commodities, bonds and several metals behave a little differently, because providers often price these from an underlying futures contract. OANDA, for instance, says that as its reference contract approaches expiry, it calculates the basis between the expiring month and the next, then moves its quoted price towards the later contract.
The cost of carrying the position does not disappear. Financing charges and price adjustments still apply. What changes is that the trader no longer has to manage the roll personally.
Margin, Leverage and Regulatory Guardrails
Both products are leveraged, so the exposure can be considerably larger than the capital committed.
In futures, margin is set by the clearing house according to the risk of the contract, and it can be raised at short notice when volatility climbs. Brokers are also free to demand more than the exchange minimum.
Spread bets work on the same principle, but for UK retail clients they sit within a framework set by the Financial Conduct Authority. Under theFCA’s restrictions, firms must:
●cap leverage at between 30:1 and 2:1, depending on the volatility of the underlying asset;
●close out positions once a client’s funds fall to 50% of the required margin;
●provide negative balance protection, so retail losses cannot exceed the money in the account.
The Cost of Holding a Position
Futures do not usually carry a separate overnight financing charge. Financing expectations are built into the futures price itself, which is why a contract several months out can trade above or below the spot market.
Spread bet costs are more visible. Positions held overnight attract a daily financing charge or credit, calculated by instrument. At OANDA, index funding combines a reference rate in the index’s currency with an administrative fee. The UK 100 references SONIA, while US indices, including the S&P 500, reference SOFR.
Neither structure is cheaper by default. A position held for a few days may cost little to finance as a spread bet. A holding measured in months could favour futures, where the cost of carry sits in the price rather than accruing daily. Holding period and market are the deciding factors.
How UK Tax Treats Each Structure
For UK residents, tax is often the deciding factor. HMRC’s Capital Gains Manual states that, because no asset is acquired or disposed of when placing a spread bet, no chargeable gains or allowable losses arise. Profits therefore fall outside capital gains tax, and losses cannot be offset against gains elsewhere.
Futures receive no such blanket treatment. Depending on the individual, the transaction and its purpose, profits may be assessed under capital gains or income tax rules, and HMRC’s manual has a dedicated section on deciding which applies. Tax rules can change and their effect depends on personal circumstances, so professional advice is worth taking before choosing a structure on tax grounds alone.
Choosing the Right Structure
Futures and spread bets may follow the same markets, yet they are fundamentally different instruments.
The more useful question is not which product tracks the market more closely. It is how the position is built, how long it can stay open, how financing builds up over time, and how much exposure each pound of margin actually controls. For a seasoned investor, those structural details can matter as much as calling the market’s direction correctly.
