Spread betting is a form of gambling that involves predicting the outcome of an event and placing a bet on whether the result will be above or below a certain value provided by the bookmaker, known as the ‘spread’. Unlike traditional fixed-odds betting, where you bet on a specific outcome (e.g., Team A to win), spread betting involves betting on a range of outcomes.
Here’s how it generally works:
1. **The Spread**: The bookmaker sets a range (the spread) for a particular market. For example, in a football match, the spread might relate to the number of goals scored, with the bookmaker predicting that there will be between 2.0 and 2.5 goals.
2. **The Bet**: The punter then decides whether they think the actual result will be higher (buy) or lower (sell) than the bookmaker’s spread. If they bet on ‘buy’, they are predicting the result will be higher than the upper end of the spread. If they bet on ‘sell’, they are predicting the result will be lower than the lower end of the spread.
3. **Stake**: Instead of betting on a fixed amount, the punter’s stake is multiplied by the amount by which the final result exceeds or falls short of the spread. This means that the potential winnings (or losses) can be much greater than the original stake.
4. **Calculating Winnings/Losses**: If the punter’s prediction is correct, their winnings are calculated by multiplying the difference between the actual result and the bookmaker’s spread by their stake. If the prediction is incorrect, they lose the same amount multiplied by the difference.
For example, if the spread for the number of goals in a match is 2.0-2.5, and you bet £10 per goal on the ‘buy’ side, predicting more than 2.5 goals, and the match ends with 4 goals, you would win:
(Actual number of goals – Upper end of spread) x Stake
(4 – 2.5) x £10 = 1.5 x £10 = £15
Conversely, if the match ends with 1 goal, you would lose:
(Lower end of spread – Actual number of goals) x Stake
(2.0 – 1) x £10 = 1 x £10 = £10
Spread betting is popular in the UK and is often used for financial markets as well as sports. It is important to note that spread betting can be high risk, as losses can exceed the original stake, and there is no limit to how much one can lose if the market moves significantly against the punter’s position. It is also tax-free in the UK, which is another reason for its popularity.