What is Spread Betting and How Does it Work?

Traditional fixed-odds betting essentially revolves around who wins and who loses, but spread betting is different as, after taking a position on a contest, bigger prizes are available the more ‘correct’ your assessment is (although, be warned, the same is also true about losses).

Punters pick which side of a ‘spread’ they want to support. If they think the outcome will be higher, they buy and if they believe it will be lower, they sell.

So if Tottenham are playing Arsenal, the spread on the match’s total goals could be 2.5-2.7. If you believe there would be more than two goals then you would buy at 2.7 and if you thought there would be fewer than two goals, you would sell at 2.5.

If you bought and there were no goals in the game, you would lose your stake multiplied by 2.7. However, if you bought and the game finished with six goals, you would win 3.3 times your stake (6.0-2.7).

What is Spread Betting?

Spread betting is a form of speculation where accuracy is rewarded rather than just a case of backing a team, horse or player to win or lose.

The more ‘right’ you are, the bigger the rewards will be but the more ‘wrong’ you are the greater losses you will suffer, so staking is a key consideration whenever you place a spread bet.

How Does Spread Betting Work? The Core Concepts

Here are the key elements of a spread bet, which need to be comprehensively understood before placing a wager:

• The Spread: A spread-betting firm will post a spread on a potential outcome of an event, so in our example of total goals in a football match between Tottenham and Arsenal, it would be 2.5-2.7
• Buying (Going High): In our example, if you thought there was a chance there would be three or more goals in the game, you would “buy” at 2.7.
• Selling (Going Low): If you thought there was a chance there would be two or fewer goals in the game, you would “sell” at 2.5.
• The Stake: The stake is the amount of money you want to wage per point in the bet.

Spread Betting in Action: A Football Example

Here is a step-by-step example of how this bet will work:

• The spread is 2.5 – 2.7 goals.
• You think it will be a high-scoring game, so you buy at 2.7 for a £10 per point stake.
• Scenario 1 (You win): The match finishes with five goals. Your bet was successful. The market moved 2.3 points in your favour (5 goals - 2.7 buy price). Your profit is 2.3 x £10 = £23.
• Scenario 2 (You lose): The match finishes with 1 goal. Your bet was unsuccessful. The market moved 1.7 points against you (2.7 buy price - 1 goal). Your loss is 1.7 x £10 = £17.

The Risks and Rewards of Spread Betting

The one essential thing to consider before you place a spread bet is that while it is a case that the more right you are, the more you win, it is also the case that the more wrong you are, the more you lose.

Consequently, losses can easily exceed your initial stake, something that cannot happen in fixed-odds betting, so that has to be factored in the bet.

Some bets allow a stop-loss function that can prevent big losses, but these have to be agreed before the bet is made so you must confirm this with the spread-betting firm before playing the bet.

Spread Betting Beyond Sports

Spread betting is not just available on sports, but it is also a popular way to speculate on financial markets, whether they be share prices, stock-market indexes such as the FTSE 100 or the Dow Jones, foreign-exchange markets or commodity markets for such products as oil and gold.

The benefit of these for those playing the financial markets is that they do not carry commissions and further assurance is gained from the fact financial spread betting is regulated by the Financial Conduct Authority (FCA).