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Spread Betting

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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 Says

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 Definitions

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    Spread

    1. The difference between the bid and the ask price of a security or asset. 2. An options position established by purchasing one option and selling another option of the same class but ...
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  • Ask

    The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security ...
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  • Bid

    1. An offer made by an investor, a trader or a dealer to buy a security. The bid will stipulate both the price at which the buyer is willing to purchase the security and the quantity to ...
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    • Bid-Ask Spread

      The amount by which the ask price exceeds the bid. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price ...
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    • Speculation

      The process of selecting investments with higher risk in order to profit from an anticipated price movement.
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    • Short (or Short Position)

      1. The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.2. In the context of options, it is the sale (also known as "writing") of ...
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