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Spread betting

Spread Betting is a form of gambling on the outcome of any event where the more accurate the gamble the more is won and conversely the less accurate then more is lost. A bet is made against a 'spread' (or index), on whether the outcome will be above or below the spread. The amount won or lost depends on the level of the index at the end of the event. The spread represents the index firms margin.

The concept was developed in the late 1980s, resembling the idea of the futures market. The bets are usually on the outcome of sporting events or indeed on financial instruments, but the firms often offer bets on more arbitrary events - such as the number of corners during a football match or the total shirt numbers of the goal scorers.

Unlike fixed odds betting the amount won or lost can be very large, as there is no single stake to limit the maximum losses. However, it is usually possible to place a "stop loss" with the bookmaker, automatically closing your bet if the value of the spread moves against you by a specified amount. "Stop wins" are the opposite -- closing your bet when the spread moves in your favour by a specified amount.

Example: In a football match between Liverpool and Everton the spread for corners is 12-13, the index firm believes there will be 12 or 13 corners in total during the match. A bettor approaches the firm with the belief that there will be more than 13 corners during the game, the bettor 'buys' at 25 a point at 13. If the final total of corners is 16 the bettor has won, receiving 3 x 25. If the final total of corners is 10, the bettor loses 3 x 25. A 'sell' transaction is similar except made against the bottom value of the spread. Often there is live pricing, which changes the spread during the course of an event allowing a profit to be increased or a loss minimized.

See also Bet exchange, Bookmaker and Parimutuel gambling.