What is spread betting, is something I have been asked a lot. Spread betting on sports is basically deciding whether the prediction offered by a particular bookmaker on a certain sports event is either too high or too low. If you think the quote is too low, you would ‘buy’.
The difference between spread betting and a traditional ‘fixed odds’ bet is that the more you are correct, the more you win. Conversely, the more wrong you are, the more you can potentially lose. This is where the skill comes into play, along with the knowledge of the markets you are betting in.
A Worked Example
A typical and easy to understand example of spread betting is as follows.
England are playing South Africa in a test match and you think that Alastair Cook is due a huge score, therefore, you check out the quotes being offered. You see that Sporting Index are offering a quote of 83-90 (for both innings), and as you are confident that Cook will get plenty of runs, you decide to ‘Buy’ at 90 for £5 a point.
You are correct, and Cook goes on to score 175 runs in the test match. That means that your profit is £425 ((175-90)*5).
From this example, you can see the power of spread betting, if you are armed with the knowledge and statistics to make informed decisions.
Please see below for a glossary of some common terms involved in spread betting.
Aggregates are a group of specials whereby we predict the total number of instances (such as goals) across a group of matches.
To bet high – a trade that the result will be higher than the current market price. The opposite of sell. The higher figure of the two figures quoted in the spread.
An account with a pre-agreed trading credit limit settled at the end of an agreed period.
An account where sufficient funds have to be deposited before placing a bet.
Betting once an event is underway on markets that are constantly updated for the duration of the event. Also known as ‘in-running’. See also Live Event Betting.
A limited risk account ensures that no bet can be placed and accepted without sufficient funds being available in the account to cover the worst possible outcome.
Live Event Betting
The term used to describe when an event is actually in progress and betting is available.
Markets in which the final result is more than seven days after the date at which the initial bet is placed.
The result on completion of an event or series of events. For example, if Manchester Utd beat Liverpool 3-1, total goals would make up at 4. See also Maximum Make-up and Minimum Make-up.
An additional deposit requested to cover the maximum risk of an open position that is going against you. Hence the expression ‘margin call’ which is a request for a margin payment.
The maximum limit on the potential margin of victory or defeat, applied in certain markets to limit the client’s and the spread firm’s maximum risk.
The maximum possible that a client may lose through a bet.
The least amount at which a market could make-up. On a supremacy bet this is, in theory, unlimited, but on a batsman’s runs it’s zero.
The funds that could be lost from placing the bet. The more volatile a market, the more risk associated with the bet.
The opposite of buy. The lower figure of the two figures quoted in the spread. See also Short (For example in cricket a client is short of England runs if he has sold England runs.)
A bet is settled once that bet has been closed. Can also refer to the final result which dictates the make-up.
The difference between the higher (buy) and lower (sell) prices quoted by a spread betting bookmaker.
The amount chosen by the client to bet per point.
Stop Loss / Stop Win
An agreed boundary on a spread bet – no more can be won or lost beyond this agreed level. These will vary according to the volatility of the market.
A market based on the margin of victory separating two competing teams or individuals. One team or player’s dominance over another. For example in rugby union, England/Wales supremacy might be quoted at 7-9 meaning Sporting Index expect England to beat Wales by 8 points.
When decimals are used to add volatility to a market, a ‘tick’ is each decimal point.
If you would like further clarification on the above, or have any questions about Spread Betting in general, please leave a comment below.