World Cup boost for spread betting

So far it's been a bad World Cup for the bookies - especially with the favourites winning 16 out of the first 20 games. And while most of the country seems to have disappeared beneath festoons of flags bearing variants on the cross of St George, you'll not find too many bookmakers flying the flag so enthusiastically.

Certainly, they want England to hang in there at least to the quarter finals - to stimulate betting interest - but, let's be realistic here, if England were actually to win the World Cup, several firms of bookmakers would probably have to issue profits warnings!

What the current World Cup competition has seen is the coming of age of sports spread betting. In football games this means you may bet on, for example, the number of goals in a match, goals in a tournament, corners, red cards, even the outright bizarre such as the aggregate total of the numbers on the goal scorers' shirts!

In fact, virtually any number can be the subject of a spread bet. Sporting Index, the UK's largest sports spread betting company, has a total 6,500 betting permutations on the 64 matches during the World Cup. IG Index, the firm which created spread betting with a market in the gold price back in 1974, also takes sports bets and is offering 200 markets on each World Cup game.

Sportingindex reckons to take around £12 million in bets over the duration of the tournament, that's around 50% up on the last World Cup, while rival Cantor Spreadfair believes demand could be up as much as 150%.

Why place spread bets?

Simple, spread betting is treated for tax purposes as gambling which means that any profits are exempt from capital gains tax, however, that also means you cannot set losses against tax. Furthermore, spread betting on shares is also free of stamp duty.

Both sports and financial spread betting users may benefit from the 'gearing' allowed by spread betting. Unlike ordinary bets where you'll be required to hand over all your stake money upfront, with spread betting only a margin, usually of around 10% will be required. There is a downside to this, however. Unlike an ordinary bet where your losses are limited to your stake, spread betting losses are potentially unlimited!

So what's been a popular bet so far in the tournament? Bets on 'goal minutes' - the number of goals multiplied by the minutes in the match at which they were scored - appear to be the punters' bet of choice so far.

The spread betting companies update their odds online second-by-second. As well as sophisticated number-crunching software they also monitor matches live to pick up what the computers might miss.

Injuries, such as Michael Owen's knee injury in the first few minutes of the England-Sweden match, red cards and corners may all change the odds on a match or even the tournament as a whole - providing more betting opportunities.

A report published earlier this month by Professor Chris Brady and Dr Richard Ramyar of City University's Cass Business School, predicts that the number of people in the UK with a spread betting account could more than double from its current level of 400,000 to one million by 2011.

The report, entitled It's Trading Jim, But Not As We Know It, was commissioned by financial spread betting company Finspreads in order to identify the opportunities and challenges facing the spread betting industry.

Professor Chris Brady of Cass said, "The spread-betting industry has considerable potential to grow, but to achieve this over the longer term it needs to move towards the mass market.

"What seems exotic and beyond the grasp of all investors is really just a form of trading. Indeed, this kind of 'derivative' trading goes as far back as 3,800 years to help Babylonian farmers sell grain."

You may be tempted to have a spread betting flutter. If you do, go into it with your eyes open - only around one in five spread bettors actually make money. Remember, bookies are invariably richer than their clients!

Risk Warning - Sports spread betting involves a high level of risk and you can lose more than your original stake. It is not suitable for everyone so please ensure you understand the risks involved and only bet with money you can afford to lose.

21 June 2006 © Moneyextra.com

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