Spread Betting

AAA

DEFINITION of 'Spread Betting'

A type of speculation that involves taking a bet on the price movement of a security. A spread betting company quotes two prices, the bid and offer price (also called the spread), and investors bet whether the price of the underlying stock will be lower than the bid or higher than the offer. The investor does not own the underlying stock in spread betting, they simply speculate on the price movement of the stock.

INVESTOPEDIA EXPLAINS 'Spread Betting'

For example, assume that a spread-betting company quotes a bid of $200 and an offer of $203 for ABC stock and you believe that the price for ABC will be lower than $200. Since you believe that the price of the stock would be go below $200, you could "bet" $2 for every dollar that ABC falls below $200. Therefore, if the stock price after a week came to $190 you would receive $20, but if the price was $215 you would end up losing $30.

RELATED TERMS
  1. Ask

    The price a seller is willing to accept for a security, also ...
  2. Bid-Ask Spread

    The amount by which the ask price exceeds the bid. This is essentially ...
  3. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
  4. Speculation

    The act of trading in an asset, or conducting a financial transaction, ...
  5. Spread

    1. The difference between the bid and the ask price of a security ...
  6. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
Related Articles
  1. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  2. The Basics Of The Bid-Ask Spread
    Investing Basics

    The Basics Of The Bid-Ask Spread

  3. How is spread calculated when trading ...
    Trading Strategies

    How is spread calculated when trading ...

  4. Choosing Between Major and Junior Mining ...
    Investing Basics

    Choosing Between Major and Junior Mining ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center