Spread betting is about betting on the amount (spread) above or below a certain point. A simple example of this would be if you made a football superiority bet. Rather than just backing Manchester City to beat Leicester, you buy Manchester City superiority. If Manchester City actually thrash Leicester say 6-1 you make lots of money. However you could have lost a large amount if Leicester had had a big win.

The whole nature of spread betting is that neither your winnings or losses are set. This means that the more right you are the more you will win. It also means that the more wrong you are the more you will lose.

With spread betting you don't just have to bet for something to win. You can choose the other side of the spread and bet for it to loose.

Spread betting has led to some excellent new markets that can be really interesting to bet on. Care is advised though as many of these are also extremely volatile.

With Index spread betting you can bet on the market to go up all down. Bets are usually defined in terms of a specific unit and you then win or lose based on the number of units that the market moves times your unit stake. Many people use financial spread betting as an alternative to normal investment as it avoids stamp duty and capital gains tax. However while similar to investing, financial spread betting is more volatile, and does not generate dividends, or have any inherent long term value.

If you bet on the favourites index you are betting on the number of favourites that will win at a particular meeting. Favourites are awarded points for where they finish in a race. A winning favourite will pick up 25 points, a favourite that is place second 10 points and a favourite coming third will earn five points.

The spread betting company will quote the number of points that they except all the favourites at a particular meeting to amass. If there are a number of hot favourites then the quote will be high. If the favourites look beatable then the quote will be low. It is then up to you to determine if you think the quote is on the high or low side. For example if the quote is 55-59 and you think that most of the favourites will do very well and therefore they will pick up more than 59 points then you "buy" the index. If you think they won't pick up that number of points then you will "sell" the index. You bet in pounds per point, i.e. £5 for every point. So at the end of racing, if you had bought the index at 59 and bet five pounds per point and the favourites had amassed 70 points then your profit is 11 * 5 = £55. If on the other hand you had sold the index at 55 you will have made a loss of £75 (15 points * £5).

As you can see, spread betting is very different to standard betting and offers a variety of different bets. If you haven't tried spread betting before then you need to proceed with caution. Unlike standard betting you don't know how much you are going to lose when you place the bet and you could be in for an unpleasant surprise later.