This is a risky way for an investor to bet on the price of a security rising or falling without ever having to buy or sell the security itself.

This opens up the possibility that the underlying asset being bet on isn’t a security at all – it might be an index instead. So for example it is possible to place a downbet on the FTSE 100 index at a level of say 6,500 at £10 per point. If the index closes at say 6,400 points while the bet is still open an investor could make around 100 points x £10 per point, or £1,000. The word “spread” refers to the fact that there is usually a small gap between the index level if you are a buyer and the equivalent if you are a seller. This represents the spread betting firm’s profit.

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