Spreadbetting is now commonplace in sport, but its origin – and the most popular form of spreadbetting – centres on financial markets.
In essence, it’s a case of betting on the performance of the stocks and shares, rather than actually investing money in them per say.
Essentially it’s a tax efficient way of backing your own judgement. You opt to ‘buy’ if you think the price of the stocks will rise, and ‘sell’ if you think that they will fall. Say, for instance, you are interested in Shell and they are currently trading at 139.2/139.5p, and the spreadbetting company you are betting with has daily quote of 139 - 139.7. If you decide to ‘buy’ £25/point at 139.7 at the offer price, this means you will make £25 for every point that the quote rises above 139.7, but you will lose £25 for every point that the quote falls below the figure.
The ‘spread’ refers to the difference between the selling and the buying price. Your losses can greatly exceed your initial deposit, therefore you need to be prepared to make additional deposits into your account in order to keep the bet running.
There are, however, risk management options built into spreadbetting accounts, so that you can limit potential losses. At any stage during the bet you can close it by ‘selling’. If, for example, the quote has grown to a bid price of 143.7 – 139.7, and you decide to close the bet, you would make a profit of £100.
Click here to go to Sporting Index, one of the biggest British sports spread betting firms
Click here to go to Capital Spreads a financial spread betting firm