Spread Betting Overview
Spread betting is a form of betting that takes into account the accuracy of a bet, rather than simply whether a bet wins or loses (as in traditional fixed odds betting). Essentially the more right you are, the more you can win. A spread is offered on a range of possible outcomes with the choice to bet above or below an opening price. Betting above is known as buying and betting below is known as selling (see ‘Buying and Selling against an Opening Price’ for full details)
The payout on a spread bet is determined by the difference between the opening price and the settlement price (the price the market settles at when the game finishes). This could be a positive difference meaning a profit or win, or it could be a negative difference meaning a loss. There will be varying levels of profit (or loss) possible depending on how far the settlement price is from the opening price. As spread betting is bet on a range there may be a large number of possible payouts. Bets can win or lose heavily, win or lose a small amount or simply break even (see ‘Calculating Profit and Loss’ for full details).
Spread betting is popular in both sports and financial markets. Our guide will focus solely on the sports spread betting market.
In sports spread betting markets exist on a wide range of aspects of the game, with the variety of bets offered much greater than in traditional fixed odds betting. Firstly a number of markets cover the outcomes in a game such as the number of goals and points for each team or in the game overall. Secondly there are markets which cover the processes within a game such as corner kicks, bookings and the time things happen.
Image 1 shows how the main markets are presented for a game of Premier League Football, between Arsenal and Fulham. Due to the range of markets, and wider range of payouts on each market, spread betting is viewedby many as a more rewarding and exciting way to bet.
Spread Betting – Placing a bet which buys or sells against a market’s opening price. Profit or loss determined by the difference between the opening price and the settlement price of the bet.
Spread Market – A market that is set in units and can be either bought or sold against. Units could be either outcomes such as goals scored, or processes such as the number of bookings.
Range of Outcomes – The number of different available outcomes that the settlement price may occur at. This range covers everything from the least possible, to the most possible.
Opening Price – The price that is offered which can be bought or sold against. The opening price reflects the average expected performance of the market, for example 3 goals in a football match. The price to buy will always be slightly higher than the price to sell to give a bookmaker cut. The difference between the opening price and the settlement price determines the profit or loss.
Settlement Price – The final number of units (e.g: goals, points, bookings) that have happened at the end of the event. The difference between the settlement price and the opening price determines the profit or loss on a spread bet.
Breakeven Point – The point at which a spread bet cannot lose money. This may be once a point has been reached when buying, or once a certain point can no longer be reached when selling. This is the point at which the bet would return neither profit nor loss. For some markets there is no exact breakeven point as this can fall in between units (such as at 2.6 goals in a total goals market)
Spread Betting Payout – The payout is given as an overall profit or loss. This is calculated from the difference between the opening price and the settlement price. The payout takes into account whether the option was taken to buy or sell with one gaining profit while the other incurs a loss.
Buying – To speculate on the outcome being higher than the opening price. When buying a stake per unit needs to be selected. If the settlement price is less than the opening price then buying will incur a loss for every unit below, whereas if the price is higher buying will gain a profit for every unit above.
Selling - To speculate on the outcome being lower than the opening price. When selling a stake per unit needs to be selected. If the settlement price is less than the opening price then selling will gain a profit for every unit below, whereas if the price is lower selling will incur a loss for every unit below.
Stake per Unit – The chosen amount bet on each movement of the market. This means every time the market moves along the range this stake is won or lost. For example if staking £20 per goal every time a goal is scored £20 is added to, or deducted from, the settlement price and payout.
Total Liability – The total amount that could potentially be lost on a spread bet. This is calculated by multiplying the stake per unit by the total units on the ‘losing side’ of the range. For example if buying total goals at 2.8 goals the biggest loss would be of 2.8 goals if there were no goals scored. A stop loss account is designed to limit the total liability.
Stop Loss – A way of limiting the total liability on spread bets by setting a lower and upper parameter to the range of outcomes the market operates on. A stop loss is designed to protect against highly unusual results and in most bet settlements does not apply. When opening an account the option to take a stop loss account or a non stop loss account is offered.
Credit Limit – The amount of credit extended to a customer to continue betting while the account balance is negative. Depending on personal circumstances (such as earnings, employment and bank balance) credit limits can be offered upon registration, or requested later.
Available Balance – The balance that is available to bet with, this will take into account any credit limit extended. Depending on customer circumstances (as type of bet being placed, typical betting patterns and form) bets may be accepted which have the potential to lose more than the available balance. In these cases the customer is liable to cover the loss and return the available balance back to the positive.
Francois is one of Howtobet4free’s co-founders and has written many of Howtobet4free’s popular Betting Guides. Francois also helps run the @howtobet4free_ Twitter account