Anyone who bets only on fixed-odds might well ask: what is spread betting, and how does it work? Here we examine some pros and cons; discuss the leverage and margin in spread betting; take a look at how important risk management in spread betting is; and introduce certain features. We also provide a typical example of a spread bet to give greater understanding.
1. What is Spread Betting
Spread betting continues to grow in popularity and is a valid alternative to traditional gambling on things such as fixed-odds. A comprehensive guide to spread betting will undoubtedly introduce new players to the finer points, but basically a ‘spread’ is the difference between a ‘buying’ and ‘selling’ price of a specific event, set by a particular brand and that variation is what all betting markets will be based upon.
2. How Does Spread Betting Work
The appeal of spread betting comes with the ability to bet on both sides of an outcome. A bookmaker sets a market, which can be intuitive, or quite complex. Fundamentally, the nearer to being ‘correct’ in a bet placed, the more in returns can be expected.
Some of the great benefits of spread betting are how it rewards perception and judgement. Players can bet on all kinds of sports, entertainment, financial markets, more or less anything that can have an outcome one way or another; but here the winning chances are evened-up.
It is more about the actual result, so whilst the favourite may come out on top in a contest, it is still possible to bet against them and still win if the margin is below that set in the spread. This form of betting highlights the limitations that exist, but are probably not appreciated, in traditional betting practices.
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3. Pros and Cons of Spread Betting
As with anything, there are pros and cons to spread betting. There is no doubt that winnings can be exceptional if prior knowledge is put to good use. A bookmaker may well have set a spread that can be identified as being overly generous, and a shrewd punter can profit massively. It provides so much more flexibility to betting, but equally, it can be very tempting to risk money on a market where the knowledge-base is limited, and this can result in a painful lesson.
4. Long vs Short Spread Betting
In many ways spread betting is a slightly more sophisticated way of gambling, particularly in financial markets and speculating on movement. Placing a bet on a sporting event following this process allows for various eventualities, such as numbers of goals in football, or distance in lengths a horse might win a race, or the number of runs that will be scored in a specific period of a game of cricket.
A bettor would wager against the ‘spread’ which would require a decision on whether the spread betting firm has predicted too high or too low, and this is known as long and short spread betting. There will be two prices, given the names ‘bid’ and ‘offer’ and the punter has the option to ‘buy’ or ‘sell’.
If the thought is that a team or individual will do better than predicted then the thing to do is buy the offer and this is referred to as long spread betting. If, however, the feeling is the prediction is too generous and the result will be considerably worse, then a player would sell at bid price, which is otherwise known as short spread betting.
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5. Spread Betting Risk Management
No form of gambling is without risk, but the amount involved in spread betting is entirely down to the individual. One of the major differences between this and fixed-odds betting is the potential to lose more than the initial stake wagered. Of course there is the theory of risk and reward, but it really is wise to understand exactly what are the risks of spread betting before committing too much to it.
With that in mind, it is always best to start with very small stakes. Granted, this will only lead to small profits, but equally it guards against heavy losses, before fully appreciating the finer points of this form of betting. Having a maximum loss limit will be beneficial, as will selecting the right markets and being fully aware of the volatility within them.
6. Spread Betting Features
Spread betting allows for a very fluid way in which to gamble on live events, giving opportunities to close the bet early, or even completely change the make up of the bet whilst the event is still active. It also allows for a longer-term viewpoint to be adopted, possibly over a complete tournament, or race meeting, rather than specifics. Conversely, it permits drilling down into single events and betting on individual performances.
6.1 Spread
The spread, also referred to as the line, is basically used to even the odds between two unevenly matched teams or individuals. Bookmakers set a spread with the intention of bringing an equal amount of betting action for both sides of the spread. In essence, it is what a betting company predicts will occur in a specific market for different events and for that they produce a price for buying or selling, leaving the punter to decide which is right.
6.2 Bet Size
When betting on the spread, one thing that is a must is the account holder has to have sufficient funds to cover any losses incurred. As a consequence, bet sizes have to match the money risked with potential loss, so the worst-case scenario always has to be considered.
7. Spread Betting Example
Although it may seem complicated, spread betting is actually quite straightforward. A player either buys or sells – as simple as that. A good spread betting example might be in football, and the spread could be for the total number of goals in a game.
If it is set at 3.9-4.1 it basically is saying that the betting company believe that a fair average would be a total of four goals in the match. Therefore, the bet is either to buy, if believing there will be more than four goals, but sell if thinking there will be less.
In this case were a bet to be placed to buy at $100 and the result ended in a 6-2 scoreline, the bettor would pocket $400, as there were four more goals than the spread predicted. The reverse of that however would be if the game ended goalless, it would have cost the punter $400, as there were four less goals than predicted. That is not a particularly complex spread bet in football, but it covers the basics.
8. What is Spread Betting and How Does it Work – FAQ
8.1 ⚽ What can I spread bet on?
There are so many opportunities to spread bet, with most sports covered, together with politics and financial markets, among others. These can be daily funded bets, weekly, monthly, or even quarterly bets.
8.2 ⚽ Is spread betting the same as day trading?
Although there are obvious similarities, spread betting and day trading are NOT the same, as there are no commissions involved.
8.3 ⚽ What are the advantages of Spread Betting?
Greater flexibility is one of the chief advantages of spread betting and with the possibility of using acquired knowledge to be even more accurate with selections, it should encourage inexperienced gamblers to quickly resolve what is spread betting and how does it work?