Spread Betting

A form of betting that depends on the establishment of a spread, or a buying and selling price, for a particular market or instrument at a certain time. For example a bookmaker may offer a spread for next week of 120 to 130 on a market index which is now standing at 125. A bullish punter would buy the spread, or accept the offer price of 130, placing a bet that the market will rise above 130. He would gain additional winnings for every point rise above that level. A bearish punter would sell the spread, or accept the bid price of 120, placing a down bet that the market will fall below 120. He would gain extra profits for every further point fall below that level. Bets can be closed out at any time by making a matching but contrary trade at the current spread. Prices for spread bets are usually set in line with the underlying market, but the advantage to the punter is that there are no commissions or trading taxes to pay, and often no taxes on capital gains. Spread betting also allows highly speculative small investments. The bets are highly geared. Spread betting is offered on sporting events and on almost every underlying financial instrument and market.