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Spread Betting Explained

What is spread betting?

You may have heard the term spread betting before and wondered what it is and how it differs from the traditional form of betting, known as fixed odds betting

Well the first thing to know about spread betting is that unlike fixed odds betting which is regulated by the gaming commission, spread betting is regulated by the Financial Services Authority (FSA). That’s because spread betting is used as a form of financial trading in the city, you can spread bet on the perfomance of stocks and shares.

The second thing to remember about spread betting, is that the amount you can win or lose is determined by how right or how wrong you are.

We’re looking at fooball spread betting offered by firms such as Sporting Index ; football spread betting is a form of betting whereby the bookmaker decides on various aspecst of a football game or a season, or even topical subjects regarding football, like how long a manager might stay in a position.

How Do I Place A Spread Bet?

In a game against Arsenal v Everton the bookmaker may give a number of prices on a number of events in that game, first let’s look at the first goal market.

The bookmaker may decide that the spread for the first goal is 28-32 minutes, this simply means that the bookie believes that the first goal will be scored between the 28th and the 32nd minute.

There the betting slip would look something like this:

Arsenal v Everton First Goal SELL 28 BUY 32

In the example above if you choose SELL, this simply means you want to go short on 28 minutes, or in other words, you believe that there will be a goal before 28 minutes. If there is a goal in say the 15th minute, then you would win your bet, but your winnings are calculated by how right you are.

So if you had sold (gone short) the first goal at 28 and the goal came in the 15th minute, then you would have got 13 times your stake back, that’s because 28-15 = 13. So you were right by 13 minutes, if you had put £10 on it you would get back 10×13=130

However if you had bought at 32, then you’d be wrong by 17 minutes because 32-15 =17 so you would lose 17 times your stake so £10 x 17=£170 loss. In the same way if you had bought at 32 and the first goal didn’t come till the 45th minute then you would have won 13 times your stake back. If there was no goal at all, you’d win 58 times your stake back.

What Are The Risks Of Spread Betting, and How Do I Manage Them?

Because of the potentially large losses, spread betting has got a reputation for being risky, however as with all betting it is about managing your risk. If you can only afford to lose £10 on a particular bet, then with fixed odds betting, it’s simple you just put on a tenner on your bet.

However with spread betting then calculating your risk is about how wrong you could possibly be in a given event, let’s look at some examples

example one:

The game is Fulham v Benfica in the old UEFA Cup, now known as theEuropa Cup and the bookie is offering the following spread on the total number of goals in the game;

SELL 2 BUY 4

In the above example the bookmaker believe’s that there will be 2-4 goals in the match, you decide that your maximum loss for this bet should be £10. You know (because of LFG’s dilligent research) that the number of games in European football that have a total number of 8 goals is less than 5%

So armed with that knowledge you can make your bet, you believe that Fulham’s great home form will see them narrowly beat or draw with Benfica, you figure because of the tight defences of the two teams that it will be a low scoring game, maybe 0-0, 1-0, 1-1 or maybe even 2-1

So you decide to go short (sell) at 2, meaning you’re betting that it will be less than 2 goals in the entire 90 minutes. You know that an 8 goal game is highly unlikely, but in order to work out your stake, you envisage the worst case scenario, that it’s a cracking 8 goal thriller.

So if it does end up Fulham 4 Benfica 4 you would lose six times your stake, because 2 goals plus 6 goals = 8 goals (4-4)

You have already decided that £10 is your maximum loss, so you would only sell at £1.66, so the highest likely amount that you’ll lose is £10, of course in an infinitely evolving universe, anything can happen and a record breaking game could happen, it’s just very unlikely that there will be more than 8 goals so therefore you’ve managed your risks

The spread betting bookmaker will also allow you to put liability limits on your account and if you’re betting in-play, there will more often than not, be a way of pulling out of the bet should you see it going wrong early on and therefore cutting your losses.

example two:

In the next example we see that Leeds United are Playing Milwall FC the bookie is offering the following spread on the amount of yellow and red cards in the match

SELL 40 BUY 70

In the above example yellow cards = 10 points and red cards = 30 points, the bookmaker believes there will be between 40 and 70 points worth of yellow and red cards.

You decide that your maximum liability on this bet should be £50, in other words that’s all you’re prepared to lose on this bet.

You decide that despite their reputations off the pitch that these two teams won’t be as dirty as you think, you believe that there will be a maximum of 3 yellows, but how do you work out what your stake should be?

Well you know that if a team has four sendings off, reducing them to 7 players, the game is abandonded and the other team automatically wins 3-0, so the maximum amount of sendings off is 7, four from one side and three from the other.

The most point conceeding way a player can be sent off, is to be given a yellow (10 points) and then a straight red (30 points) making a total of 40 points, if this happened 7 times that would mean a points total of 40 x 7 =280

Therefore if you sold at 40 then the biggest possible loss you could incur would be 280 points – 40 = 240.

So if you wanted to guarantee that you wouldn’t lose more than £50 you would divide that by 240, making £0.20p

Of course the likelihood of 7 players getting sent off in this way is vanshingly small and you would probably work out your worst case scenario at closer to 120 points (3 sendings off via yellow cards and straight reds and four bookings).

Spread Betting Summary

Spread betting is regulated by the Financial Services Authority.
When spread betting you’re going ‘long’ or ‘short’ (buying or selling) a positiion.
How much you win or lose is dependent on how right or wrong you are.
When working out how much you can afford to lose, imagine the worst possible scenario and work out your stake from there.

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