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An Introduction to Spread Betting and its Viability as an Investment and Sports Betting Vehicle
by James Crier Tue, 01/10/2017 - 10:53
While the US may be enduring one of the most toxic and distasteful election campaigns in living memory, this does not mean that investors are not to profit on the outcome. There are many online markets that individuals can participate in, for example, from winning party indexes to the exact split of states that are captured by each candidate, to cash in on the political turmoil. Make no mistake; however, it is the spreadbetting markets that remain the most popular among punters, who can speculate on one of two potential outcomes and enhance their chances of placing a successful wager to make money.
What is Spreadbetting?
- Spreadbetting is a unique way of betting. It focuses around speculating on the movement of stocks and shares. It’s tax free and easy to do, relying on the movement of markets, not the outcome of an event.
- It was developed in the 1940s by Charles K. McNeil, it thrived in the US during the post-war era and it quickly became the premier method for speculating on the price of gold.
- Spreadbetting has since become a popular strategy in the sports betting market where you can bet on a range of different outcomes.
What is Spreadbetting in the Field of Investment?
In investment terms, spreadbetting is best described as a derivative strategy, as traders don’t have ownership like when placing a bet in other forms of betting. It is used to speculate on the performance of a particular asset's price, and more specifically whether it will rise or fall within a predetermined period of time. Given this, and the fact that spread bettors do not actively own the underlying asset, they have greater flexibility and are able to profit even in a depreciating market.
This is central to the appeal of spreadbetting, as is has a more simple nature and compatibility with numerous financial markets. The spread itself refers to the difference that exists between an assets' buy and sell price, which are quoted when you initially make your move. Although online brokerage firms like ETX Capital will profit from the spread, they do not charge bettors a commission fee.
Over time, spreadbetting for investment has evolved, making complex financial markets and assets accessible to even inexperienced traders. London banker Stuart Wheeler drove this trend when he founded the IG Index back in 1974, as he utilised spreadbetting to help traders invest in gold. This sector was prohibitive and difficult for many to participate in at the time, and Wheeler's efforts brought a popular and secure asset successfully into the mainstream of the financial market.
Wheeler was also a pioneer within the industry, as he paved the way for spreadbetting to become a global and accessible investment tool. It has since established itself as a viable vehicle for investing in derivative, margin-based markets, with Forex providing a relevant case in point. Spreadbetting is now the easiest and most accessible method of trading currency, as investors can speculate on their chosen pair and achieve returns regardless of the depreciation or the volatility that exists in the marketplace.
Spreadbetting as a Sports Betting Aid: How Does it Work?
In sport, when spreadbetting you predict whether or not an eventual outcome ends up above or below a spread. So you can bet on whether a team’s final score is higher or lower than an expected total. It is most widely associated with sports such as soccer and American Football, where there are a vast array of spreadbetting markets in which bettors can participate (including groups of games and long-term markets such as point's predictions for the NFL and English Premier League).
While the events may change, the same rules apply. Bettors can browse their chosen market and make selections based on the available spread. If they believe that the outcome will be higher than the quoted price, they can buy. Those who think the outcome will be lower can sell, the spread on, while this process can be performed on individual or grouped games. If you agree with the prediction recorded for a specific event, you should look for a different outlet for your wager.
Although spreadbetting is quite simple, you do need to be careful. The margin-based nature of sports market spreadbetting means that you can earn marginal returns based on the accuracy of your spread bet, for example, enabling you to drive huge profits in areas where you have a lot of knowledge. The flip-side of this is that you can also lose more than your initial wager when your speculation is wrong, and this is a key consideration that all spreadbettors must pay attention to when starting out.
Interesting, sports market spread bettors who are new to the market can also boost their chances of success by pursuing fixed odds wagers. These bets are presented as simplified 'win' or 'lose' options with specified odds, which ensure that you are able to manage losses. So although you still bet on the outcome of a specific event, the betting process is simplified and you only need minimal knowledge of your chosen market to make a decision.
Of course, your earning potential is far lower with fixed odds spreadbetting, but you can at least make sure that you lose no more than your initial stake if the wager is unsuccessful.
How to Make a Profit as a Sports Spread Bettor
What everyone really wants to know about sports spreadbetting is how they can make a profit.
The margin-based nature of spreadbetting helps you to apply your hard-earned knowledge and use this to increase your earning potential. What does change is the type of knowledge required to prosper across numerous markets, as each operates differently with its own rules, whether it is sports or finance.
Sports market spread bettors tend to rely exclusively on current form and real-time data sets, for example, including how their chosen teams are performing and how they are being impacted by factors such as injuries and suspensions. These will have a big impact on the result, whereas historical trends barely have any meaning at all (particularly in competitive markets and events with tight spreads). In this respect, sports market spreadbetting is accessible to anyone who has relevant and real-time knowledge of a particular sport’s league or competing teams, whereas those who are students of the sport and its history have less of an advantage.
How to Make a Profit in Finance Spread Betting
In finance spreadbetting, the reverse is true. Although economic, social and geopolitical events all impact on the value of specific currencies and precious metals, these assets are primarily governed by a series of underlying laws that govern change. A person financially spreadbetting needs to rely on their theoretical knowledge to make informed trades. So while topic knowledge in spreadbetting is crucial, you will need to understand the demands of your market and determine the type of insight to make the most successful trades and wagers.
What Can Sports Bettors Do to Optimise their Chances of Success?
One of the best pieces of advice is not to place a wager too soon, particularly given the overriding reliance on real-time knowledge and team news. While odds are always liable to go up and down, a delayed wager placed at the right time can help you to cash in on last-minute team news or insight, particularly in competitive leagues such as the NFL and Premier League. Remember that clubs and franchises have been known to rest players ahead of a more significant game, so you should only complete your wager when the final team-sheets have been published.
Another way to improve your chances of success are to wait to place your wager until after the event has started, especially if it’s being shown live on TV. You can wait until about 5 or 10 minutes into the game to make your decision, giving you a much more detailed insight.
On a final and more strategic note, there is a growing trend for selling in sports spreadbetting, as the hype and sectarian nature of wagers (sports fans often back their favourite teams) encourages the majority to buy. This means that there is generally more value to be had in opposing the view of the masses, while sellers can often access slightly more favourable odds and positions. Just be sure to deploy this strategy wisely and sparingly, as selling will only prove profitable if the circumstances are right and you choose the right event.