Spread Betting .

Spread betting is now very popular, but do you understand how it works? Here some of the jargon is explained.



Spread: The difference between the high and low figures of the quote. E.g. Take a cricket match for example England v West Indies, the bookies think the West Indies will win by 100 runs so they may quote West Indies 90 -100. So the spread is 10 points this could also be called the bookmakers margin. The spread guarantees, (all other things being equal) the bookmaker will make a profit regardless of the final result.









Quote:The actual high and low figures of the spread. In the above example the quote would be 90-100.



Market: An outcome of an event. There can be a multitude of markets for any one event (that’s one of the things that make spread betting so interesting) for example for a soccer match, you could have a market for how many red cards will be shown, or how many corners will be given etc etc



Markup: The final result in points. For example a market for the number of corners given in a soccer match. At the final whistle if the number of corners awarded was 7 that would then be the markup



Buy (also called to go Long): To bet that the final result (the markup) will be higher than the top figure of the original quote.



Sell (also called to go short): To bet that the final result will be less than the lower figure of the original quote.



Stop Loss: A mechanism to limit the amount that can be lost/won.



Close: To cancel a bet before the final conclusion, the bet will be closed at the revised spread at the time of the close request.



A real life example: Cricket Match England v West Indies.

The bookmakers think that the West Indies will win by 100 runs and they quote a 90-100 West Indies to win.



Your view is that the West Indies will win but by only 20 runs or so. You decide to Sell 90 at 10 pounds a point. The final result is a win for the West Indies but only by 1 run. You win the bet and would collect 89 times 10 which is equal to 890 pounds!

BUT be warned there can also be a massive downside, for example lets assume the West Indies win the match by 500 runs! Then your losses would be a huge 410 times 10, which is equal to 4100 pounds!! In theory you would have had the opportunity to close the bet at any time at a revised spread to limit your losses.



Always remember that spread betting can be volatile. The spread can rapidly move for/against.

By: Mr Fox

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