Keep it simple with fixed-odds betting

published 25 March 2011

Spread bettingfor the first time can seem a bit bamboozling. Especially if you are used to betting on, say, the horses or the rugby using a traditional bookmaker. However, there is a solution for a spread betting novice the fixed-odd bet.

Bookies typically quote fixed odds all the time; '4/1' (£400 could be won from a £100 stake) or '3/2' (£300 from a £200 bet) and so on. Spread betting brokers, on the other hand, quote a bid-to-offer spread on each outcome.

If this seems unfamiliar and you are uncomfortable with the idea of not knowing how much you could lose on a spread bet without getting into another unfamiliar area stop losses don't worry. That's because most spread betting brokers offer another way to bet that mimics the way odds are quoted by a bookmaker.

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For example, at betonmarkets.com you pick a market this could be currencies, UK shares, US shares or even commodities. You then decide on your bet. For example, you might think the Barclays share price will rise in the next hour (this can be varied). Then choose how much you want to win if you are right let's say £200 (again this can be varied and the payout calculated in other currencies too such as the USD). 'Price the bet' will tell you the stake required at the time of writing, around £117. Get the bet right and you get back £200 a return on £117 of 71%. Get it wrong and you lose your initial stake, but no more.

Sure some of you will have noticed that this type of bet operates a bit like a call option on Barclays. As such it's not the cheapest way to bet because you are paying betonmarkets.com a bit extra for the known downside protection up front (often this works out slightly more expensive than placing a traditional spread bet with a stop loss built in).

Also, if you get a fixed odds bet wrong, you say goodbye to 100% of your initial deposit it's an all or nothing 'binary' outcome.

However, for simplicity and certainty, fixed-odds bets are a good place to start out as a nervous novice before you take on conventional spread betting.

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.