Excerpt from: Understanding Spread Betting
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| August 27, 2007 | | Placing spread best on performances | One of the advantages of spread betting is that it is not always necessary to bet on a cut-and-dry financial instrument such as a stock, index, bond or currency. Spread betting also offers performance spreads. These are spread bets placed on whether or not something will happen.
Performance spreads include an artificial point system whereby the indexation company assigns values to possible outcomes. For instance, if people wanted to place spread bets on the outcome of the Euronext merger with the New York Stock Exchange, a very simple system would look something like this:
- 7-9 points for the merger to fail
- 6-4 points for the merger to go through
- 1-3 points for the Field
Of course, most performance spreads have many more options, and the spreads vary with the perceived likelihood of the option.
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