Spread Betting
Spread betting is a way of betting whereby, instead of placing a fixed stake on an event for a known potential profit, you choose to 'buy' or 'sell' a market above or below a certain quoted 'spread' (or index). Your profit or loss is not fixed and will depend on how close the result is to the direction you have chosen. Sports spread betting shares many features of the financial markets.
An example may help at this point. We'll look at the Total Corners market for Real Madrid vs Villarreal. The spread ahead of the game is quoted 9.5–10 which means you can sell corners at 9.5 or buy corners at 10. The initial quoted spread will reflect what the spread company thinks will be a likely number of corners as well as their experience of where money is being placed (like bookmakers with odds, spread companies will adjust their spread with a view to keeping the book balanced and their risk exposure minimised).
Let's say you expect this game to generate a lot of corners: more than the 10 quoted on the buy side. You buy corners at a price of 10 for £5 per corner.
If you are right and it turns out there were 14 corners in the game, you win £5 for each corner above the price of 10 that you bought at: (14 – 10) x £5 = £40 profit
On the other hand you could be wrong and there are only 5 corners in the whole game. You lose £5 for each corner below the 10 you bought at. You can think of it as buying at 10 and having to sell after the game at a price of 5: (5 – 10) x £5 = –£50 loss
Spread markets include buying or selling runs in cricket, team supremacy or time of first goal in football, or bespoke indices created by the spread companies. In spread betting if it moves there's probably a market. The variety is almost endless and some border on the ridiculous. One that is a little random, for example, but nonetheless popular is 'Shirt Numbers' in football matches, where the market is based on adding together all the shirt numbers of the various players who score, from either team, in the game! In the above La Liga match the spread was 43–46.
Risk
If you buy shirt numbers at 46 for £10 a point and the match ends up a goalless draw, you'll find you've just lost yourself £460. This illustrates the potential to lose significant amounts of money. It is very important when spread betting to understand the risks and your potential exposure. At least with this scenario, the worst position is that there are no goals and you end on zero. Your potential loss was capped at £460. If on the other hand you had sold shirt numbers, there is no maximum and you could, at least in theory, lose thousands of pounds if there are a whole heap of goals from high shirt numbered players.
Always be prepared to lose to the maximum possible, not just to the level you think likely, and set your unit stake accordingly. So in the shirt numbers example, if you can afford to lose £100 then you might be looking at £2 a point. There will always be surprise results.
In play
Spread betting introduced us to the concept of in–play (or 'in–running') betting. This means that betting continues while the match or event is in progress and spreads move up and down to reflect what is happening in the event. If there's an early goal, the spreads on the markets influenced by goals will move up or down accordingly. As in the pre–event market, positions can be opened and closed in–play.
Closing out
In conventional betting you place your bet before the event starts and after it you either collect your winnings or accept that you've lost your stake money. In spread betting you can also close your positions by way of placing a bet in the opposite direction. The purpose of this is to lock in a gain or limit a loss and it will normally be used in–play.
| Previous - Laying bets | Next - Range and Line betting |