Spread Betting Explained

Looking to have spread betting explained? Discover how spreads work in online betting for financial markets and sports. Explore the differences between spread betting and traditional gambling at top online betting sites.

A. Tzamantanis

Sports Betting Editor

Last Updated: 2024-07-17

Fact checked by:

James Pacheco

Sports Betting Editor

7 minutes read

Image Credits: Pixabay

Table of Contents

Spread betting is gambling higher or lower on a position set by the bookmaker. Many exchanges now offer financial spread betting alongside a range of sports betting markets. We’ll show you how spreads work and highlight the differences with gambling at the top online betting sites.

How Does Spread Betting Work?

What is a spread bet? It’s a wager on whether a position (financial or sports) will fall or rise related to the bookmaker’s spread. Essentially, it’s like purchasing stocks and shares in a commodity without having to make a physical purchase: all you’re doing is betting on whether the price will rise or fall. The more “right” you are, the more you profit.

Compared to fixed-odds markets, losses can accrue in spread betting if you bet the wrong way. That’s why betting sites allow you to set stop-loss limits (and win limits) to protect you from the downswings.

downswingYou can also use arbitrage in spread betting to guarantee a profit, regardless of the outcome. As a market moves, the spread betting company moves its spread up or down to reflect the changing action. You can lock in a profit (or limit losses) by betting against your original position.

Spread Betting Advantages and Disadvantages

There are various pluses and minuses to understanding the spread betting markets and tools. We recommend starting with your own play-money trades before risking any of your cash.

Advantages

Spread betting offers many advantages, least of all tax-free profits in some jurisdictions. As betting on the markets is seen as gambling, rather than trading, you can avoid state or federal taxes depending on where you live. Plus, some spread exchanges offer commission-free trading on some financial and sports markets.

•    Low commissions at some exchanges
•    Tax-free profits in some countries
•    Potential for massive profits
•    Stop-loss limits available

Disadvantages

When learning how to understand spread betting, knowing the risks is important. Unlike fixed-odds betting, the potential for large losses is huge..

Financial spread betting can be volatile too. You’re betting on the whim of traders and the markets, so you must close your position if things turn against you.

Reputable spread betting firms offer guaranteed stop-loss orders. With these, you can set a price to close a position if the market moves againat you.

•    Potential losses are possible
•    In-depth knowledge of markets required
•    Deep budgets needed for leverage

Leverage & Margin

Leverage is the value of your initial outlay compared to your potential winnings. For example, you can deposit 5–10% of your potential winnings, perfect if you don’t have the whole outlay available.

Margin in spread betting means the amount of cash you need to have in your gambling account to cover your losses. Essentially, you’re covering your leveraged position in case things you wrong.

The margin requirement you need is usually calculated as a percentage of your position, depending on the volatility of the betting market. For example, a 30% margin requirement on a position of $1,000 would mean you’d need $300 in your account (30% of $1,000).

Popular Spread Betting Markets

With spread betting explained, let’s look at one or two examples. The top spread betting firms accept trades on the financial markets, commodities, and a range of sports.

You must undertake a full financial check-up when you open your account. This is to guarantee that you can afford the leverage and any margin. Plus, some betting sites charge commission on trades.

Financial Spread Betting

We should start with financial markets when we explain spread betting. Most spread betting firms let you bet on whether a commodity or market will rise or fall.

For example, imagine a spread betting exchange is accepting bets on the price of gold. It sets the spread as $2400-$2425 an ounce. That means you can “sell” gold at $2,400, or go lower, over a fixed period (say, one day). Alternatively, you go high and “buy” at the top end of the spread, $2,425.

For metals, you’ll need around a 5% exposure. So, to get exposure of $5,000, you’d have to have a margin of 5%, or $250.

Sports Spread Bets

Spread betting offers also stretch to sports events. Like financial spread betting, you take positions on a variety of markets, such as total team points, match scores, or player performance.

Imagine you want to “buy” (go high) Kansas City Chiefs total rushing yards in one game, with the spread at 95–105. That means you think the total rushing yards will be over 105 for the game.

You buy Total Rushing Yards @ $10/yard. So, for every 1 yard above 105, you win $10.

As the game goes on, the Chiefs are rolling over their opponents. The bookmaker shifts its spread to 130–140 with 20 minutes remaining. That means you can now “sell” total rushing yards (go lower than 130) and lock in a 25-point profit (130 minus 105) of $250.

Alyx TzamantanisSports Betting Editor

With 10 years of experience in content writing, Alyx has produced countess guides, reviews and articles covering a wide range of topics in the iGaming industry. She loves anything to do with online casinos, as well as UK and international sports betting.