What is Spread Betting and How Does it Work?

Bill Esdaile

Archery wouldn't strike most people as the most logical place to start when explaining a form of gambling. However, the archery board is actually the perfect place to start when attempting to explain the art of Spread Betting. Both are all about accuracy; hitting the bullseye rather than the outer-ring – or at least hitting closer to the bullseye than your opponent (the trader). Punters like your father and his father before him would always have wagered on the outcome of an event in the simplest manner possible – either winning or losing. Spread betting changed that and this first chapter will try to explain and clarify the basics of spread betting in as simple a way as possible.

Love him or loathe him, Bruce Forsyth is a British institution, and one of his flagship shows, Play Your Cards Right, demonstrates the basics of spread betting better than anything else. A card is turned over and you have the option of going higher or lower. That's it. It really is that simple. The decision that every spread betting punter will always have to make is whether they go higher or lower. The result of the next card will then determine exactly how much they have won or lost. Except in sport, it is much more thrilling and exciting – even more so than one of Bruce's Dollies!

The Spread
The first thing a spread betting punter must consider before betting on any event is where the 'spread' is pitched. The 'spread' is the range that covers the point at which a punter can bet lower (sell) to that at which he can bet higher ( buy). Humour me while I run through this very basic example...

Imagine you see a woman walking out of a grocers with a bag full of apples and when you ask the shop assistant how many apples were in that bag, they say "I don't know, somewhere between 18-20". This is the 'spread' and is what a trader always has to set before an event. You are certain there are more than 20 apples in the bag so you buy (bet higher) the predicted number at £1 per apple. That means you win £1 for every apple over 20. There are 28 apples in the bag, so you have made a profit of £8. Have a look at this formula (Albert Einstein, Pythagoras eat your heart out!)…

Result [or make-up] (28) → minus prediction (20) → equals profit (8)

Now, as we all know, a formula for finding guaranteed winners in gambling is practically impossible, otherwise there wouldn't be any bookmakers. Let's say there was a guy wearing slightly dodgy glasses who had seen the same woman leave the shop, but was sure there were less than 18 apples in her bag (18 being the lower end of the spread). He decided to sell (bet lower) at 18 for £1 per apple and the final make-up of 28 meant that he made a £10 loss.

Make-up (28) → minus prediction (18) → equals loss (10)

This sums up the basic principle of spread betting and shows how simply a profit or a loss can be made, just by applying the apples example to the number of goals in a football match or the number of runs in a cricket match. In the coming weeks we will be delving far deeper into the world of spread betting. Trust me; it really can make the most mundane sporting event seem like the most exciting!

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Chapter 1: What is Spread Betting and How Does it Work?

Chapter 2: Why Would You Spread?

Chapter 3: When Should You Spread Bet?

Chapter 4: Great Spread Betting Myths

Chapter 5: Betting In-Play

Chapter 6: Do Spread Betting Traders Always Get It Right?

Chapter 7: Golden Rules of Spread Betting