Key Betting Terms Explained: Spread Betting
Spread Betting is a betting style popular with UK punters and is offered by a limited number of specialist betting firms.
So what is spread betting?
The basic premise is that a spread betting firm such as Sporting Index, Hi/Lo, City Index, Cantor Index or IG Index predicts the outcome of an event and then offers a ‘spread’ based on that figure. (Spreads can be offered on sporting, financial or any other types of events)
You, the punter, then decide whether you think the result will be higher or lower than the spread firm’s prediction.
A cricket example is that the firm may predict that the Australian cricket team will score 245 runs, so they offer a spread of 240-250 runs (if the actual score falls between that range they win regardless – but they rarely get it bang on).
In this example, you have to decide if you think Australia will score more than 250 or less than 240. If you think more, then you ‘buy’ at 250 and stand to win 1x your stake for every run more than 250 that Australia makes. If you think they’ll score less than 240 runs, you ‘sell’ at 240 and win 1x your stake for every run short of 240.
The main thing to remember is that you always buy at the higher number in the spread and sell at the lower one.
If you predict wrong, you lose – in this example, 1x your stake for every run over 240 or under 250. So if Australia actually makes 275, and you’d bought for a stake of £1 per run @ 250, you’d win £25. If you sold @ 240, you’d be losing money, and would lose a £ for every run you were out -£35.
Another aspect to spread betting is that the spread is constantly updated throughout the progress of the event. Prices are revised ‘in-running’ to reflect the current state of play. Say Australia reach 100 without loss. They’ll revise their spread upwards to say, 280-290 runs.
If you originally sold at 240 for £1 per run, you might be thinking you made a mistake, but there are ways to limit your losses – you can ‘close’ your bet by placing an equal-sized bet in the opposite direction. So now if you bought Australia for £1 per run at the latest spread of 290, you’d be taking a £50 loss – the difference between the spread you sold at 240 and the one you’re buying at 290. This would be admitting defeat, but you’d instantly know how much you’d lose.
For that to make sense, you’d have to now believe that Australia would score more than 290, because of they end up scoring fewer runs, you’d lose less than the £50 if you kept with your original bet and let it stand.
The reverse is also true. You can take a profit rather than leaving it to chance. If you originally bought Australia at 250, and the spread had been revised to 280-290, selling at 280 would guarantee a £30 win (again, the difference between the first and second spreads).
Here’s a Football Spread Betting example.
Say Arsenal is playing Man Utd and a spread on offer for the game has Arsenal with a goal superiority of 0.1 goals to sell, or 0.4 goals to buy.
This would be normally written 0.1 / 0.4 and means that when you buy at 0.4, if Arsenal wins by a goal, you’d be paid out at [(1-0.4) x your stake]. If Arsenal wins by 2 goals it would be [(2×0.4) x your stake].
Conversely if you didn’t think Arsenal would win you could have sold at 0.1. So if the match was a draw you’d lose [(0.1-0) or 1/10th of your stake] but if Arsenal were beaten by a goal then you’d make (1.0-0.1) x your stake.
The settle-up of this spread where the stake was £10 is illustrated below.
In football spread betting the stake is usually not just £1 per goal (like the £ per run cricket example), but £10, £20 or £100 per goal and so can result in big wins – or big losses!
As winnings and losses can mount up quickly in spread betting, it’s advisable to bet only on events you understand (duh!), and then can keep a close eye on so you can cut your losses or take profits in-running.
NOTE:
As spread betting is only offered by a few companies the spread margins are fairly tight. In general punters can make a lot more money long term on fixed odds and/or Asian Handicap betting than on Spread bets when you consider the amount of risk involved.
>>Next Key Betting Term Explained: Fixed Odds Betting – coming soon!
>>Last Key Betting Term Explained: Asian Handicap Betting
Add comment January 27th, 2007