Spread betting is very popular both in the financial world and within the field of sports betting. Below, we will take a look at how it works and some of the reasons why spread betting is so popular.
Betting sites often offer spread betting on events where the main outcome isn’t very interesting to bet on. Example: Two soccer teams are about to play each other, but Team XYZ is known to be widely superior to Team CDE. So, the odds for betting on a win for Team XYZ are abysmal. So, the betting site offers a spread betting opportunity to make it more interesting. “We think that Team XYZ will make 6 to 8 goals.” Now, 6-8 is the spread, and punters can bet on there being either fewer than 6 goals made by XYZ or more than 8 goals.
One of the appeals with spread betting is the ability to make money from both rising and falling prices.
With spread-betting, you can make money from down-turn price movements, instead of just investing in things that you think will increase in market value. So, if for instance a specific stock or the stock market, in general, is plummeting, it is still possible to make money from spread-betting, and it will be much easier than trying to carry out complicated transactions such as short-selling securities.
Buying and selling financial instruments, such as shares, can require a lot of capital, unless you want to stay with the notoriously volatile penny stocks. With spread betting, you can achieve the same exposure to small price movements in well-known and expensive company shares without actually having to invest in the underlying asset.
Many trading platforms online that offer spread betting will allow you to make wagers on price movements on indices, e.g. S&P 500, Dow Jones Industrial Average and FTSE 100. This way, you can achieve an exposure that is in some ways similar to investing in an index fund.
Are you interested in making money from the fluctuations of cryptocurrencies exchange rates, but doesn’t want to go through the trouble of actually getting a cryptocurrency wallet, learning how to store cryptocurrency, learning how to buy and sell it, and so on?
Are you worried about letting your cryptocurrency sit with an online cryptocurrency platform, considering how they are largely unregulated entities and that many of them that have gone awol in the past, taking their clients’ cryptocurrency with them?
A solution to this problem is to go to a regulated and licensed trading platform that offers spread betting on cryptocurrency exchange rates. This way, you never actually have to own cryptocurrency to make money from it. Many online platforms offer spread betting on the exchange rate between major cryptocurrencies (e.g. Bitcoin, Ether) and major fiat currency (e.g. USD, EUR, GBP). Some also offer spread betting on the exchange rate between different cryptocurrencies, e.g. the Bitcoin to Ether exchange rate.
In some jurisdictions, gains from spread-betting are treated favorably from a tax perspective compared to for instance money earned from buying and selling securities or real estate. For investors, this can be a huge incentive to engage in spread-betting instead of actually buying and selling assets.
For some trading strategies, the pricing model (how the broker/platform makes money) is better for spread betting than for buying securities. That is because most platforms will charge you a commission when you buy securities and derivatives. For the spread betting, the costs are instead included in the spread. The platform is still making money, but not through commissions.
Which method that is best for you will depend on several factors, including your trading/betting strategy and how the platform is calculating commissions and setting the spread.