Spread betting is a dynamic and exciting alternative to fixed-odds betting, and it originally focused on financial markets.
It was swiftly expanded to sports betting and will appeal to bettors on sports such as football, cricket and tennis because of the potential for higher gains.
It is a volatile type of betting, however, as losses can significantly exceed the original stake placed.
Spread Betting Explained
The main difference in fixed odds vs spread betting is that, whereas in fixed-odds markets a bet is either a winner or a loser, spread betting is more nuanced.
Losses or profits increase depending on the accuracy or inaccuracy of your original prediction.
The payout is determined by how right or wrong you are in relation to the spread set by the bookmaker.
For example, if you expect a cricket team to make a big total then every run they score in excess of the original spread will increase your winnings.
Conversely, if they are bowled out for a total far lower than the spread, your losses will be higher.
How Spread Betting Works
The obvious starting point for newcomers to spread betting is the bookmaker spread itself.
This is the equivalent of the price offered by a fixed-odds bookmaker but in spread betting it covers a range rather than ‘fixed odds’.
An Example of Spread Betting
The spread for total goals in a football match might be set at 2.8-3.0. These are known as the buy and sell prices.
A bettor who expects a high-scoring match will ‘buy’ at 3.0 (the top end of the spread) and one who is anticipating a low-scoring contest will ‘sell’ at 2.8.
If the match finishes 0-0 then the seller wins 2.8 times their stake as 2.8 minus zero – the number of goals – equals 2.8. The buyer loses 3.0 times their stake as 3.0 minus zero equals 3.0.
If either team wins 4-3 then the total-goals market is settled at seven. Buyers would win four times their stake because seven minus the spread price of 3.0 equals four.
In that case sellers would lose 4.2 times their stake because seven (the total match goals) minus 2.8 (the ‘sell’ quote) equals 4.2.
Stake Per Point Explained
The volatility of spread betting makes it important to consider how much you stake per point.
In a total-goals market, where realistically the final outcome will only range from zero to eight or nine, a larger stake per point is acceptable.
Far smaller stakes per point are recommended when betting on a cricket team’s first-innings runs as they could be bowled out for 50 or score more than 600.
Sports vs Financial Spread Betting
Sports spread betting covers a host of different markets in a single match or event.
Depending on whether you think the spread is too low or too high, you can buy or sell a football team’s supremacy (how many goals they will win or lose by in a match) or a player’s ‘goal minutes’.
If a player scores a hat-trick with goals in the 56th, 70th and 89th minutes, their goal minutes add up to 215.
Popular longer-term markets include how many points a team will earn over the course of a league campaign or how many penalties, red cards or headed goals there will be in a tournament such as the World Cup.
Financial spread betting tends to focus on the prices of stocks, commodities and financial indices.
The basic objective remains the same but you are betting on the market movement – selling if you expect the price of something to go down and buying if you think it will go up.
As with any financial investments, it is vital to be aware that these markets are volatile and to tailor your stakes to different situations.
Risks and Rewards
The open-ended nature of spread betting means it is high risk and high reward.
It is crucial to have good risk management, assessing the worst-case scenario as well as the best possible outcome and staking accordingly.
When placing a fixed-odds bet, you generally know exactly how much you stand to win or lose.
That is not the case in spread betting although it is possible to use stop-loss limits to prevent losses on a market from exceeding a certain level.