Spread Betting
Spread betting is a name given to various formats of wagering, the object of the wagering being the outcomes of certain events. The rewards, or payoff, of spread betting derive from the accuracy of the wager and not merely winning and losing. To be more precise, the spread in spread betting consists of a number of possible outcomes, and the bettors wager on whether the result will be above or below this spread. Charles K. McNeil, a Connecticut-based mathematics teacher, invented spread betting after he went to Chicago and turned to bookmaking in the 1940s.
Spread betting became immensely popular in the UK in the 1980s and has become a significant growth market in recent times. Though it is definitely an exhilarating and often highly rewarding activity, spread betting also implies a high level of risk - as does every form of gambling.
The primary intention behind spread betting is the creation of an active market for both sides of a wager, regardless of whether the specific event's outcome of appears to be biased towards a particular side. For instance, bettors may engage in spread betting on a sporting event wherein a strong team will face off with a historically weaker team. In normal gambling, the bettors would prefer to back the better team in such an event and almost entirely ignore the weaker team.
Another form of spread betting is financial spread betting, in which one can back one's trading judgment without actually purchasing the underlying instrument or product being traded in. In such a case, spread betting takes place on an unknown outcome based on odds that someone else has set, which in this case would be a financial spread betting company. Such a company takes up a financial instrument and quotes two prices, which are basically the spread. These prices act as the bid and offer prices. The bettor can buy at the offer price and sell at the bid price. As with all spread betting, financial spread betting is also based on predictions of a future outcome.
One must remember that all spread betting has a specific expiry date, which means that the predictions involved come with a set time frame. Nevertheless, a spread betting enthusiast still has the option of closing out his or her position at any time before expiry occurs. In financial spread betting, one must decide on whether to buy or sell the prediction that the financial spread betting company has made on the future outcome.
To make it simple, spread betting is nothing but betting on a two-way price that a bookmaker on a certain market has quoted. The spread bettor buys at the offer price and sells at the bid price, making a profit if the spread has moved sufficiently in the right direction in the time that elapses between buying and selling.
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