Spread betting

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Spread betting involves taking a bet on the price movement of a security. A spread betting company quotes two prices, the bid and offer price, 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 but simply speculates on the stock's price movement.

For example, say 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 think the price of the stock will go below $200, you could "bet" $2 for every dollar that ABC falls below $200. If the stock price after a week was $190, you would receive $20, but if the price was $215 you would lose $30.[1]


References

  1. Spread Betting. Investopedia.