We are welcoming bets on [Iain Duncan Smith] because his chances of winning still appear slim

Simon Clare Coral Eurobet

Referring to the mystery man behind the �10,000 bet, Mr Sharpe said: "He was casually dressed, in his early 30s and entirely unknown to the staff in the branch.

"This is by some distance the biggest bet yet struck on the Tory leadership race and the man will make a profit of �5,000 if he is successful."

Other odds include Kenneth Clarke at 5-1, David Davis at 10-1, Michael Ancram at 25-1 and John Redwood and Liam Fox, both at 33-1.

Since Mr Duncan Smith declared that he would stand, his odds with Coral Eurobet have fallen from 5-1 to 7-2.

Coral also considers Mr Portillo to be the favourite, at 2-7, while Mr Clarke is given a 5-1 chance and Mr Davis is an outsider at 16-1.

Coral Eurobet spokesman Simon Clare said: "Iain Duncan Smith is undoubtedly the main danger to Michael Portillo but we are welcoming bets on him because his chances of winning still appear slim."

'Fantastic' interest

Spread betting firm IG Index, founded by Stuart Wheeler, who gave �5m to the Tories in January, reports "fantastic" interest in the leadership election.

Duncan Smith: 'Big mover' on spread bet market

The company is making a market on the percentage each candidate will receive in the final round of voting. This ballot is held among ordinary Conservative party members and only the top two candidates, as chosen by the 166 Tory MPs, go through to this stage.

Michael Portillo has always been the favourite. His spread opened at 45-50 and was bought up as high as 55-60 before falling back to 48-53 on Tuesday.

Iain Duncan Smith has been the big mover in the market. After opening at 10-15, he was supported up to a Tuesday high of 24-29.

David Davis, who also formally launched his challenge on Tuesday, has been increased from an opening 1-3 to 3-6 as a result.

Though yet to declare his intentions, Ken Clarke is third favourite. He opened at 15-20 and was bought up to 17-22 before slipping back to 13-18. However, while News Online was interviewing the market-maker at IG Index, a client bought Mr Clarke at �50 a point, shifting his spread back up to 15-20.