The main difference is the way the prices are expressed.

Spreads quote a buy and sell price, depending on whether you think the outcome of an event will be higher or lower.

Conventional bets quote you the ratio between your bet and the payout if you are successful: 20-1, 11-4, 15-8 and so on. In that way your gains and losses are fixed; with spread betting, they are unlimited.

Spread betting also offers more flexibility; while conventional bookmakers are offering odds on Labour winning an overall majority or being the largest single party, spread-betting firms allow you to bet on the number of seats.

William Hill, the conventional bookmaker, is offering odds of 1-20 on Labour winning an overall majority, which has moved from 1-8 at the start of the campaign. So for every £20 bet, you would get £1 if Labour won a third term — a return of 5% in just four days if you placed a bet now. The odds on Labour being the largest single party are 1-33, so you would win £1 for every £33 bet.

But Paddy Power, the Irish bookmaker, announced last week it would pay out on all Labour win bets without waiting for the election result, because of “Labour’s increasing lead in the opinion polls”.

If the Tories win, the bookmaker will honour all bets.

How does spread betting work?

Spread-betting firms quote a spread for a given election result, based on opinion polls and campaign developments. However, spreads are primarily affected by supply and demand; the more people bet on Labour, the more the buy and sell prices will go up.

On Friday, Cantor Spreadfair was quoting 361.9 to 362.9 for the number of Labour seats. If you thought the party would do better, you would bet a certain amount for every seat above 362.9 — “buy” Labour. If you thought the party would do worse, you would “sell” Labour and win for every seat it finished short of 361.9. You lose if the party wins more seats than that. Most firms set a minimum bet. At IG, it is 50p per seat; at Cantor, it is £1.

Suppose you bet £10 that Labour would get more than 362.9 seats and on election night they secured 400. You would win £371 — £10 for every seat between 400.0 and 362.9. If they won just 300 seats, you would lose £629 — £10 for every seat between 300.0 and 362.9.

Remember, it is possible to lose more than your original stake. Firms usually ask for a deposit before you can place a bet: at Cantor, for example, you must have £25 in your account for every £1 bet. In the example above, therefore, you would need a deposit of £250 — but this would be outweighed by your losses if Labour won just 300 seats.

When can I close my bet?

You can close your bet at any time to realise profits or cut losses. However, many political spread betters prefer to hold until election night. Michael Johnson, who spread-bets with IG, said: “If you close your bet before election night your profit or loss will be calculated using the spread at the time, which includes the firm’s profit. If you hang on, your takings are calculated using the actual result.”

You can also use a “stop loss”, which automatically closes your bet at a price you set in advance.

What about tax?

You do not have to pay capital-gains tax on profits from spread betting, and you cannot offset losses against tax.

But Alexander Davidson, author of How to Win as a Stock Market Speculator, argues this is an illusory benefit. He said: “Firms are quick to promote the tax-free status of profits from spread betting — but what use is it when 95% of punters lose?”