| Whereas
the potential profit and loss of a bet is known at the outset
when betting with a sportsbook, it is much more fluid when
spread betting. This is because spread betting firms reward
and punish according to how right or wrong you are about
a certain event. This can potentially involve big losses,
but also big wins. Spread betting firms evaluate an event
and secure an opinion as their own. This is known as the
"spread". They then invite bettors to bet against them in
one of two directions - by buying or selling the spread
for a certain unit of money.
For example, if a firm thinks that the Pakistan cricket
team will make 305 runs, they might quote 300-310. If you
think that Pakistan will make less than 300 runs, you would
sell the spread. If you think that they will score more
than 310 runs, you would buy the spread.
If you sold the spread for £10 a point, and Pakistan made
290 runs, you would win the difference between the result
at the lower spread figure, multiplied by your stake: 300
- 290=10 x £10 = £100. However, if Pakistan made 320 runs,
you would lose the difference multiplied by your stake:
320 - 300 = 20 x £10 = £200. And of course, the same principle
applies (using the higher spread figure as a reference point)
if you had bought the spread.
An interesting aspect of spread betting is that, in many
cases, the spread changes as the sporting event unfolds.
This allows a bettor to close his position and take a profit
or loss even before the event itself has ended.
Spread betting firms make their profits from the spread
itself, and most often hedge themselves so that they don't
have to worry too much about individual winners or losers.
This means that they generally don't ban winners as quickly
as sportsbook makers do, but it's still a possibility in
extreme cases.
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