Unless you have a very big beard or still insist on listening to vinyl in a dark and dingy basement you will probably have come across the music streaming in one form or other. Spotify, allows users to listen to pretty much all music ever made (with a few exceptions) through their phones or online. It’s free, if you can suffer a few adverts, or around $10 a month.
Here’s a quick run down of how to speculate on Spotify shares.
There are three ways, buy them outright, CFDs or spread betting. Here’s a quick run down of what each one is.
If you want to buy them you need a stock broker that offers US shares. You pay for them in full and they sit on your account until you decide to sell them. It’s worth noting that you have to buy them in USD so will have to convert GBP to USD to do so. Double check what your broker’s conversion rate is as this can be quite a large hidden cost. If you are buying a massive amount, it’s worth having a USD denominated stock account and using a currency broker for the conversion.
You can also trade through CFDs or spread betting. Both allow you to trade on margin using leverage. Leverage enables you to get exposure to more shares than your funds on account. As Spotify is a tech stock and a new listing the margin rates are going to be high (around 50%) so with Spotify CFDs or spread betting you could buy $10,000 with only $5,000 on account. Of course this increases the risk reward ratio meaning your profits and losses are multiple twice.
One of the other benefits of Spotify spread betting and CFD trading is that you can speculate on the shares going down as well as up. If you think the price of Spotify shares will drop you can go short. You sell shares, then buy them back later, at a profit if the price drops (obviously at a loss if they go up).
With Spotify CFD trading and spread betting you can also trade in GBP. Which means you can work out your P&L without having to factor in GBP to USD currency conversions. Depending on your broker or bank these can cost around 5% so if you are just interested in taking short term speculative positions trading in your local currency can reduce your trading costs.
There are tax advantages to spread betting on Spotify rather than CFD trading as profits on financial spread betting are currently free of capital gains tax.
You need a broker that offers Spotify stock trading. ETX Capital are currently offering Spotify CFD and spread betting and have produced a handy guide to trading Spotify on their website. Below is a screen shot of the Spotify on the new ETX Capital Trader Pro Platform.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.