Spread betting is a way of treating a bet like a share price. You can buy, let us say, Manchester United for the cup final, at 0.5 of a goal at pounds 10 a point. For every goal they win above the level of 0.5, the punter wins pounds 10. A 4-0 win, for example, would yield a profit of 3.5 points or pounds 35. If United lose, the punter's downside liability is pounds 10 a point. So a 3-0 defeat means a loss of 3.5 points. Just like buying Marks & Spencer shares at the quoted price.
The attraction of spread betting is threefold. First, it is very exciting and provides new ways of betting on close events like football matches. Ordinarily, in a "two-horse race", like a football or rugby match, the price would be so tight, there would be no point in having a bet. Secondly, the operator absorbs the tax, so the punter has a tax-free wager. And thirdly, the price can change during play - just as shares move up and down - enabling the punter to adjust his risk as the event is going on. It is ideally suited to television and electronic communication.
The risk is that the punter does not know in advance his downside liability. If, in the example, given above, an amazing reversal of form occurred, and Manchester United lost by 10-0, the gambler would lose 10.5 times his stake. On the other hand - why be pessimistic? - they could win by 10-0. Look at New Zealand v Japan where the rugby scoreline was 145-17, a margin of 128. Punters who bought New Zealand's "superiority" (win margin) at the pre-game price of 54, showed a profit of 74 points. City Index lost pounds 120,000 on that event, reports chairman Jonathon Sparke, still cheerful. Spread betting is not for the faint-hearted.Reuse content