Spread Betting FAQs

How do Spread Betting companies make their money?

In general, spread betting companies don’t charge a commission or broker fees. They make their money through the spread – that’s the difference between their buy and sell prices. The spread offered by the companies tend to be wider than the spread on the underlying market. And it’s in these margins they make their money.

Companies will also make money by charging premiums for certain kinds of risk management tools. They will also charge for overnight funding of rolling bets

Do Spread Betting companies want me to lose?

The companies themselves will tell you: “No”. But are they lying? Well clearly, when you make a bet, if you lose, they make money. But spread betting is not as simple as that. Because generally the spread betting companies are not betting against you – they are covering your bet through hedging and bets on underlying markets.

It’s not in any company’s interest for their customers to be unsuccessful – otherwise they’ll go somewhere else.  So the companies usually hedge internally - playing bets on opposing sides against one another - and they hedge by on the underlying market, thereby limiting their exposure to any swings in the market.

It’s up to their own dealers to manage all of this successfully, and if they do, it may be true that they don’t always care if you win or lose.

How do I decide which Spread Betting Company is the best one for me?

There are many factors you will want to consider, in particular:

How tight are their spreads?

What are their Margin requirements?

What Markets do they cover?

Do you like their Trading platform – is it user friendly, and suitable to your needs?

What kind of risk management tools do they offer?

What kind of charting/analysis tools/news services do they offer?

You may also want to take into account their opening hours, the history and reputation of the company, and what kind of support services they offer, by telephone or online.

Is Spread Betting a high risk option?

Put simply, spread betting is as risky as you want it to be. If you control your trading size and correctly manage your risk then you can prevent yourself from making large losses. Spread betting is a leveraged product traded on margin.  This means that the investor’s initial outlay need only be a fraction of the overall value of the bet. But while this can result in impressive profits from a small upfront payment, it can also result in losses several times more than the initial capital put in. It goes without saying, but you should never risk more than you can afford to lose. Things can change very rapidly in volatile markets. Spread-bettors must keep a close eye on their positions, analyse and get to know the market they are operating in very well, and have a clear strategy for managing risks based on the various tools offered by different companies. And if indeed it is risk you are after, you can always have a free bet online with a regular sports bookmaker.

Further Reading:

1. Spread Betting Explained

2. Advantages of Spread Betting

3. A Spread Betting Example

4. Spread Betting FAQs

5. Risk Management