Spread On A Bet

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Spread betting is a derivative strategy, in which participants do not own the underlying asset they bet on, such as a stock or commodity. Rather, spread bettors simply speculate on whether the asset's price will rise or fall, using the prices offered to them by a broker.
As in stock market trading, two prices are quoted for spread bets—a price at which you can buy (bid price) and a price at which you can sell (ask price). The difference between the buy and sell price is referred to as the spread. The spread-betting broker profits from this spread, and this allows spread bets to be made without commissions, unlike most securities trades.
Investors align with the bid price if they believe the market will rise and go with the ask if they believe it will fall. Key characteristics of spread betting include the use of leverage, the ability to go both long and short, the wide variety of markets available, and tax benefits.
Spread betting allows traders to bet on the direction of a financial market without actually owning the underlying security.
Spread betting is sometimes promoted as a tax-free, commission-free activity that allows investors to speculate in both bull and bear markets, but this remains banned in the U.S.
Like stock trades, spread bet risks can be mitigated using stop loss and take profit orders.
If spread betting sounds like something you might do in a sports bar, you're not far off. Charles K. McNeil, a mathematics teacher who became a securities analyst—and later a bookmaker—in Chicago during the 1940s has been widely credited with inventing the spread-betting concept. But its origins as an activity for professional financial-industry traders happened roughly 30 years later, on the other side of the Atlantic. A City of London investment banker, Stuart Wheeler, founded a firm named IG Index in 1974, offering spread betting on gold. At the time, the gold market was prohibitively difficult to participate in for many, and spread betting provided an easier way to speculate on it.
Despite its American roots, spread betting is illegal in the United States.
Let's use a practical example to illustrate the pros and cons of this derivative market and the mechanics of placing a bet. First, we'll take an example in the stock market, and then we'll look at an equivalent spread bet.
For our stock market trade, let's assume a purchase of 1,000 shares of Vodafone (LSE: VOD) at £193.00. The price goes up to £195.00 and the position is closed, capturing a gross profit of £2,000 and having made £2 per share on 1,000 shares. Note here several important points. Without the use of margin, this transaction would have required a large capital outlay of £193k. Also, normally commissions would be charged to enter and exit the stock market trade. Finally, the profit may be subject to capital gains tax and stamp duty.
Now, let's look at a comparable spread bet. Making a spread bet on Vodafone, we'll assume with the bid-offer spread you can buy the bet at £193.00. In making this spread bet, the next step is to decide what amount to commit per "point," the variable that reflects the price move. The value of a point can vary.
In this case, we will assume that one point equals a one pence change, up or down, in the Vodaphone share price. We'll now assume a buy or "up bet" is taken on Vodaphone at a value of £10 per point. The share price of Vodaphone rises from £193.00 to £195.00, as in the stock market example. In this case, the bet captured 200 points, meaning a profit of 200 x £10, or £2,000.
While the gross profit of £2,000 is the same in the two examples, the spread bet differs in that there are usually no commissions incurred to open or close the bet and no stamp duty or capital gains tax due. In the U.K. and some other European countries, the profit from spread betting is free from tax.
However, while spread bettors do not pay commissions, they may suffer from the bid-offer spread, which may be substantially wider than the spread in other markets. Keep in mind also that the bettor has to overcome the spread just to break even on a trade. Generally, the more popular the security traded, the tighter the spread, lowering the entry cost.
In addition to the absence of commissions and taxes, the other major benefit of spread betting is that the required capital outlay is dramatically lower. In the stock market trade, a deposit of as much as £193,000 may have been required to enter the trade. In spread betting, the required deposit amount varies, but for the purpose of this example, we will assume a required 5% deposit. This would have meant that a much smaller £9,650 deposit was required to take on the same amount of market exposure as in the stock market trade.
The use of leverage works both ways, of course, and herein lies the danger of spread betting. As the market moves in your favor, higher returns will be realized; on the other hand, as the market moves against you, you will incur greater losses. While you can quickly make a large amount of money on a relatively small deposit, you can lose it just as fast.
If the price of Vodaphone fell in the above example, the bettor may eventually have been asked to increase the deposit or even have had the position closed out automatically. In such a situation, stock market traders have the advantage of being able to wait out a down move in the market, if they still believe the price is eventually heading higher.
Despite the risk that comes with the use of high leverage, spread betting offers effective tools to limit losses.
Risk can also be mitigated by the use of arbitrage, betting two ways simultaneously.
Arbitrage opportunities arise when the prices of identical financial instruments vary in different markets or among different companies. As a result, the financial instrument can be bought low and sold high simultaneously. An arbitrage transaction takes advantage of these market inefficiencies to gain risk-free returns.
Due to widespread access to information and increased communication, opportunities for arbitrage in spread betting and other financial instruments have been limited. However, spread betting arbitrage can still occur when two companies take separate stances on the market while setting their own spreads.
At the expense of the market maker, an arbitrageur bets on spreads from two different companies. When the top end of a spread offered by one company is below the bottom end of another’s spread, the arbitrageur profits from the gap between the two. Simply put, the trader buys low from one company and sells high in another. Whether the market increases or decreases does not dictate the amount of return.
Many different types of arbitrage exist, allowing for the exploitation of differences in interest rates, currencies, bonds, and stocks, among other securities. While arbitrage is typically associated with risk-less profit, there are in fact risks associated with the practice, including execution, counterparty, and liquidity risks. Failure to complete transactions smoothly can lead to significant losses for the arbitrageur. Likewise, counterparty and liquidity risks can come from the markets or a company’s failure to fulfill a transaction.
Continually developing in sophistication with the advent of electronic markets, spread betting has successfully lowered the barriers to entry and created a vast and varied alternative marketplace.
Arbitrage, in particular, lets investors exploit the difference in prices between two markets, specifically when two companies offer different spreads on identical assets.
The temptation and perils of being overleveraged continue to be a major pitfall in spread betting. However, the low capital outlay necessary, risk management tools available, and tax benefits make spread betting a compelling opportunity for speculators.
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Options Trading Strategy & Education
Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security.
Arbitrage is the simultaneous purchase and sale of the same asset in different markets in order to profit from a difference in its price.
Put-call parity is the relationship between the price of European put and call options with the same underlying asset, strike price, and expiration.
A leg is one component of a derivatives trading strategy in which a trader combines multiple options contracts or multiple futures contracts.
A reverse conversion is a form of arbitrage that enables options traders to profit from an overpriced put option no matter what the underlying does.
Bond futures oblige the contract holder to purchase a bond on a specified date at a predetermined price.
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Spread betting is a derivative strategy, in which participants do not own the underlying asset they bet on, such as a stock or commodity. Rather, spread bettors simply speculate on whether the asset's price will rise or fall, using the prices offered to them by a broker.
www.investopedia.com/articles/active-trading…
The “spread” is the betting line or odds used to determine the parameters for wagering on either the favorite or underdog in a sporting event. Wagering on a spread is intended as a method to ...
athlonsports.com/nfl/what-does-spread-m…
Are there any betting odds on points spreads?
Are there any betting odds on points spreads?
Points spreads are a popular gambling choice in pro and college football as well as basketball. Here are some examples of ATS betting odds from the NCAA, NBA and NFL.
www.si.com/gambling/2020/05/14/gamblin…
What is key takeaways spread betting?
What is key takeaways spread betting?
Key Takeaways Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security. The investor does not own the underlying security in spread betting, they simply speculate on its price movement.
www.investopedia.com/terms/s/spreadbet…
What is the required deposit for spread betting?
What is the required deposit for spread betting?
In spread betting, the required deposit amount varies, but for the purpose of this example, we will assume a required 5% deposit. This would have meant that a much smaller £9,650 deposit was required to take on the same amount of market exposure as in the stock market trade.
www.investopedia.com/articles/active-tra…
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https://www.investopedia.com/articles/active-trading/082113/what-spread-betting.asp
Перевести · 07.01.2021 · Spread betting is a derivative strategy, in which participants do not own the underlying asset they bet on, such as a stock or commodity. Rather, spread bettors simply speculate on whether the...
https://en.m.wikipedia.org/wiki/Spread_betting
Spread betting is any of various types of wagering on the outcome of an event where the pay-off is based on the accuracy of the wager, rather than a simple "win or lose" outcome, such as fixed-odds (or money-line) betting or parimutuel betting.

A point spread is a range of outcomes and the bet is whether the outcome will be above or below the spread. Spread betting has been a major growth market in the UKin recent years, with the number o…
Spread betting is any of various types of wagering on the outcome of an event where the pay-off is based on the accuracy of the wager, rather than a simple "win or lose" outcome, such as fixed-odds (or money-line) betting or parimutuel betting.

A point spread is a range of outcomes and the bet is whether the outcome will be above or below the spread. Spread betting has been a major growth market in the UK in recent years, with the number of gamblers heading towards one million. Financial spread betting (see below) can carry a high level of risk if there is no "stop". In the UK, spread betting is regulated by the Financial Conduct Authority rather than the Gambling Commission.
https://demystified.slotoff.com/how-does-a-spread-work-in-betting
Перевести · The spread, also referred to as the line, is used to even the odds between two unevenly matched teams.... In a spread bet, the odds are usually set at -110 on both sides, depending on …
https://athlonsports.com/nfl/what-does-spread-mean-sports-betting
Перевести · The “spread” is the betting line or odds used to determine the parameters for wagering on either the favorite or underdog in a sporting event. Wagering on a spread is intended as a method to...
https://www.investopedia.com/terms/s/spreadbetting.asp
Перевести · 19.03.2021 · Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security. The investor does not own the underlying …
https://www.thelines.com/betting/point-spread
Перевести · A team favored by -7 must win the game by eight or more points to win the bet. If the team wins by seven, the result is a “push” and the bet is refunded. A spread of +7 means the team must win the game or lose by fewer than seven points to win the bet. A loss by seven would result in a push.
https://www.oddsshark.com/sports-betting/point-spread-betting
Перевести · A puckline is what a spread is called in the NHL, while a runline is associated with MLB betting. In both cases, the spread is almost always -1.5 for the favorite and +1.5 for the underdog, but the betting odds fluctuate a lot more than in NBA or NFL point spreads because the spread doesn’t usually change.
A point spread bet is also referred to as betting the spread or handicap betting. Point spread betting is a sports betting market in which a team e...
If New York is +2.5, then that means they are the underdog and have been spotted or given 2.5 points. If New York loses by two or fewer points, the...
When it comes to point spread betting, and you bet against the spread, it won’t be enough for the favorite to win the game outright. The favorite w...
https://sports-spread-betting.com/how-to-spread-bet
Перевести · 08.09.2017 · how to spread bet Spread betting on sports often comes with a stereotypical reputation of being overly complex, difficult to learn, or difficult to master effectively. In reality, with some logical thinking and research, spread betting is far simpler than it might initially seem, and provides a unique way of placing a wager on a sports event.
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Spread betting - Wikipedia
How does a spread work in betting? 2021 April update
Spread Betting Definition - investopedia.com
Spread On A Bet