So what precisely is spread betting? It is actually a very simple concept to grasp. Here we explain spread betting by use of typical examples of bets that might be placed.
The spread betting firm makes a prediction on a particular aspect of a sporting event, such as how many goals will be scored in a game of football. Their spread may be 2.4-2.7 goals on a particular football match. You have the choice of going below 2.4 goals if you think few goals will be scored or above 2.7 if you expect a flood of goals.
- Example 1: You go lower than 2.4 goals (called “selling” the goals) for say £10 a goal. If the match ends 0-0 then you have won 2.4 x £10 = £24. However if there were four goals you would lose £16.
- Example 2: You go higher than 2.7 goals (called “buying” the goals) for say £10 a goal. If the match ends 2-2 then there have been four goals and you win £13 (4 goals – 2.7 goals = 1.3 goals x £10). However if there were no goals at all you would lose £27.
In short, you just need to decide whether their prediction is too high or too low. The concept is that simple. If you think they have pitched their spread just right then that is the time not to have a bet.
If you apply the concept of spread betting to a volatile market, like how many cricket runs a team (or individual batsman) will score, then you can see how profits or losses can quickly mount. After all, if the spread is around 200 runs for a team total and they actually score 500 runs, then the profit or loss would be circa 300 x your chosen stake.
The rule of thumb is to have bigger stakes on low volatility markets (like goals in a football match) and low stakes on volatile markets (like series cricket runs).