Spread Betting Explained

Here is an explanation of how spread betting works:

England prepare to bat on the first day of a Test match and a spread firm quotes their total first innings runs at 300-320.

If you think England will do badly and will score fewer than 300 runs, you sell. If you think they will do well and exceed 320 runs you buy.

If you sell you are trading at the lower figure, in this case 300. If you buy you are trading at the higher figure, 320.

If you sell England for a pound at 300 and England make 260, you win 40 times your stake (300-260=£40). If you sell England for a pound at 300 and they make 372, you lose 72 times your stake (372-300=£72).

If you buy England for a pound at 320 and England make 260, you lose 60 times your stake (320-260 = £60). If you buy England for a pound at 320 and they make 372, you win 52 times your stake (372-320 = £52).

The spread firm makes its money by trading at either end of the 20-point spread they have quoted.

Ah, I hear you say. That is all very well but what does it mean when a football team is quoted at 0.3-0.6 against another. This is what foxes many people and is probably the single reason why spread betting took a while to catch on.

If the companies had had the chance to reinvent spread betting I wouldn't mind betting they would have given considerable thought to operating football supremacy on a basis of ten points per goal to avoid this major point of confusion.

Once you get your head around it, of course, you wonder what the fuss was about. Here is the easy way to understand football supremacy.

You see a price on an advert, teletext page or in the Racing Post that says 0.3-0.6 Liverpool/Everton.

What it means is this: Liverpool's supremacy over Everton is rated at 0.3-0.6 of a goal. It is at this point that the following question is always uttered: how can you have 0.3 of a goal? You can't, but nor can you measure one team's supremacy over another in whole goals. Football is too low-scoring a sport for such a vague assessment.

What happens in this instance is that if Liverpool win 2-1 the make-up (final total) is 1(2 minus 1). If it ends 0-0 the make-up is 0 and if Everton win 2-0 Liverpool supremacy makes up at minus 2.

So, as with our cricket example, if you sell Liverpool for £20 at 0.3 and they draw 1-1, you win 0.3 times your stake (0.3-0=0.3 or £6). If you sell Liverpool for £20 at 0.3 and they win 4-0, you lose 3.7 times your stake (4.0-0.3 = 3.7 or £74).

If you buy Liverpool for £20 at 0.6 and they lose 4-2, you lose 2.6 times your stake (2+0.6 = 2.6 or £52). If you buy Liverpool for £20 at 0.6 and they win 5-0, you win 4.4 times your stake (5.0-0.6=4.4 or £88).

Understand this and the rest should be easy.