Types of Spread Betting
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Spread betting is term used to describe a variation of gambling where an investor bets on the direction of a market. They either make a profit or loss depending on the deviation from the spread or quote. Spread betting offers more avenues and methods of increasing your investment portfolio than traditional investment methods like buying shares.
Sports Spread Betting
When you spread bet on sports you are generally dealing in goals, corners, bookings, shirt numbers, or the minute a goal was scored.
For example let's take a betting scenario in a football match. The spread betting company sets the spread for 10-12 corners for a match. A bettor approaches the firm and buys at £25 per corner above 12 corners. If the total number of corners in the match is more than 12, eg 16 corners, they make a profit
Profit = (16 - 12) x £25 per corner = 4 corners x £25 per corner = £100 profit
However, had there been some good defending there may only have been 9 corners in the game in which case the user would lose. Loss = (12 - 9) x £25 per corner = 3 corners x £25 per corner = £75 loss.
In a "Sell" transaction, where you bet on the market to go down, everything is similar except the bet is made against the bottom value of the spread, in this case betting on less than 10 corners.
In a sell transaction, everything is similar except the bet is made against the bottom value of the spread.
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Financial Spread Betting
In financial spread betting investors spread bet on financial instruments like shares, commodities, forex etc. But unlike stock market trading, with financial spread betting you can make a profit when the share prices are falling. Financial spread betting offers many advantages over traditional share trading.
But it is essential to understand the risks involved. You can lose more money than your initially invest.
Financial spread betting also offers certain tax benefits*.
Many spread bettors also trade on Stock Market Indices ie betting on the movement (up or down) of the whole market eg betting on the FTSE 100 or S&P500.
Spread Betting on Commodities
Spread Betting on Commodities is based on commodities such as gold, oil, livestock, coffee etc. Betting is based on the future price and market value of the commodities. Historically food traders and farmers would bet on the value of crops prior to the harvest. The bettor makes profit or suffers a loss based on the future market value. This was an early form of the Futures market.
Forex Spread Betting
Forex spread betting enables you to benefit from the foreign exchange (Forex or FX) market by trading in foreign currencies When you spread bet on FX you can trade on numerous currencies eg GBP, US$, Euro, Japanese Yen, Aus $, Canadian $, Swiss Franc etc.
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Types of Spread Betting' by KK, updated 18-Jun-07
For related pages also see:
Understanding Financial Spreads - Financial Spread Betting, updated 05-Dec-08
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UK Spread Betting Markets, updated 05-Dec-08
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Online Financial Spread Betting Companies, updated 05-Dec-08
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Financial Spread Betting vs Share Dealing, updated 01-Dec-08
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Predicting the Futures Markets with Technology, updated 01-Dec-08
The right spread trading strategies could help you successfully spread bet on different financial products, maximise profits and limit your losses. You should invest time in...read article.
Types of Spread Betting, updated 18-Jun-07
Spread betting is term used to describe a variation of betting gambling where an investor bets on the direction of a market. They either make a profit or loss depending on the deviation from the spread or quote. Spread trading offers more avenues and...read article.
Financial Spread Trading Opportunity and Risk Involved, updated 16-Jun-07
The risks involved in financial spread betting can be high. You can lose more money than you initially invest. People who spread bet on shares need to understand the market. You can usually minimize risks by limiting losses using various tools and...read article.
Financial Spread Betting in the UK, updated 04-May-07
When you spread bet on stock market indices, the stock market indices, eg FTSE 100 or NASDAQ 100, act as the financial instrument. The investor speculates on the price movement of the whole stock market index. Unlike share dealing, you do not actually...read article.
Spread Trading Tips - A Technical and Analytical Game, updated 04-Jun-07
Most experienced spread traders would probably cite one of their top financial spread betting tips is to understand the importance of placing stop losses and limit orders. You can use a stop loss or limit order feature at most levels. This feature limits your...read article.
History of Financial Spread Betting, updated 18-Sep-07
The rise of spread betting in the UK can be dated back to the '70s when in '74 IG Index was founded. At the time IG Index was the only spread betting company in the UK. This initial growth was helped partly by the liberal UK Government tax policies...read article.
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