Bet Spread Definition
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Bet Spread Definition
Spread Betting Spread Betting has three potential outcomes: wins, losses, or pushes. Ultimately, these three outcomes hinge on three factors: the favored contender, the underdog contender, and the actual spread number pre-set by the sportsbook.
A lot of betting games you’ll find in a sportsbook, online or offline, hinge on an unambiguous, binary, and black-and-white win-lose outcome. From moneyline betting, which entails wagering on a certain team winning or losing, to parlay or teaser bets where every leg must win (or push) for the bettor to win, or over/under bets where one scenario wins, most bets are contingent on fairly clear cut winning.
Unlike those other forms of sports betting , however, spread betting entails wagering within a certain margin of points to win, as opposed to wagering on a hard figure or number. This might be preferable to other betting games, as you don’t necessarily need to hit a definitive number of goals, touchdowns, home runs, or score points to win; just fulfill a certain margin.
But what should perspective spread betters know about the rules of the game beyond fulfilling a certain score margin to win? Find out through this comprehensive, in-depth guide.
Spread wagers have three potential outcomes: wins, losses, or pushes. Ultimately, these three outcomes hinge on three factors: the favored contender, the underdog contender, and the actual spread number pre-set by the sportsbook. These spread scoring units will vary depending on:
The parameters of the respective event or game being wagered on
Whether or not one side is perceived to have a home-field advantage
If each side is priced equally as “evens” or “pick ‘ems”
Irrespective of these factors, most bookmakers will charge for wagers evenly, across both potential outcomes of the wager. This charge is often known as “vigorish”, AKA “vig”, and most sportsbooks will fix the vig at -110, meaning that if they want to win $100, a bettor would have to pay a $110 vig stake and have their wagered outcome fall within their preferred spread margin.
If the bet in the hypothetical wins, then the bettor will be able to take home $100, plus the amount equivalent to their stake, so they would walk away with a $210 award. The winning outcome wouldn’t have to fall within the exact number of score points predicted by the bookmaker, but within a higher or lower margin of score points than the spread.
The Favorite: Then their favored team’s winning score must exceed a greater margin of victory than the point spread pre-set by the sportsbook.
The Underdog: Then their underdog team must lose within a margin below the spread, or beat the odds and handily win the game to cover it.
Whether you’re betting on the favorite or the underdog, these are generally how spread bets shake out. Alternatively, if the score winds up being IDENTICAL to the point spread number that the bookmaker pre-set or predicted, then your wager will just be counted as a “ push ”.
While these betting outcomes won’t qualify as losses on your overall gaming record, they also won’t qualify as wins either. Instead of gaining or losing any money, the bettor will simply be refunded the money they wagered for their betting stake. As you can imagine, this isn’t a preferred outcome for the house either; they’re a business, they’ll want to fulfill a profit motive, and they’ll want to do whatever they can to keep staying afloat.
So in order to avoid such a push outcome, the bookmaker may fix the point spread at ½ or .5 of a point. This half-point is sometimes known as the “hook”, and it’s this single hook that can sometimes make or break a spread betting outcome. For example, imagine that the Philadelphia Eagles are favored 6.5 points over the Dallas Cowboys in a Monday night game.
Even if Jalen Hurts came through in the clutch and scored the game-winning touchdown for the Eagles, the bettor who bet on them as their favored team would still lose their wager, as that game-winning touchdown still failed to exceed the 6.5+ margin of victory. But whether you’re spread betting on the favored team or the underdog team, why should you place it?
In both casino gaming and iGaming, spread betting persists as one of the most popular forms of sportsbook betting for a reason. Because your bet is contingent on a range of results as opposed to one definitive result, you’ll have slightly better odds of winning than you would through other betting games.
Furthermore, most major sports can exceed extremely high scores. For example, in 1966, the Washington Football Team and New York Giants set the record for the all-time highest-scoring NFL game, a total of 113 combined points with Washington beating New York 72-41.
In the NBA, the all-time highest-scoring game occurred in 1983 when the Detroit Pistons beat the Denver Nuggets 186-184. With scores potentially escalating this high, it might be wiser to bet on a range of score points as opposed to just one solid, hard outcome. Ultimately though, what you choose to do is ultimately a matter of personal choice and preference.
Before you consider placing a spread bet, you should also consider keeping the following three pointers in mind:
Understand the rules and parameters around your preferred sportsbook platform. Review the fine print as carefully as you can.
Never wager more than you would be comfortable losing. From injuries changing the over/under , to extremely wide score point margins, a lot can change, and you have to be comfortable with contending those ever-changing risks.
Consider sticking exclusively to sportsbooks that operate on a half-point spread, so you won’t risk your wager becoming a push bet.
Once you’re ready to bet, it’s time to pick your favored online sportsbook platform. Currently, 13 states, as well as Washington D.C., all offer legal online sports betting services.
Depending on where you live, you could currently have as little as one option or as many as 20, but that number is only expected to keep growing in the coming months. Ultimately, your best bet for following the best betting options will be following OddsSeeker.
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Spread betting refers to speculating on the direction of a financial market without actually taking a position in the underlying security. The investor does not own the underlying security in spread betting, they simply speculate on its price movement using leverage. It is promoted as a cost-effective method to speculate in both bull and bear markets.
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A contract for differences (CFD) is a marginable financial derivative that can be used to speculate on very short-term price movements for a variety of underlying instruments.
Stop-loss orders specify that a security is to be bought or sold at market when it reaches a predetermined price known as the stop price.
Day traders execute short and long trades to capitalize on intraday market price action, which result from temporary supply and demand inefficiencies.
An exit point is the price at which a trader closes their long or short position to realize a profit or loss. Exit points are typically based on strategies.
The E-mini S&P 500 is an electronically-traded futures contract representing one-fifth of the value of the standard S&P 500 futures contract.
Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.
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Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security. It involves placing a bet on the price movement of a security. A spread betting company quotes two prices, the bid and ask price (also called the spread), and investors bet whether the price of the underlying security will be lower than the bid or higher than the ask.
The spread bettor does not actually own the underlying security in spread betting, they simply speculate on its price movement.
Spread betting should not be confused with spread trading , which involves taking offsetting positions in two (or more) different securities and profiting if the difference in price between the securities widens or narrows over time.
Spread betting allows investors to speculate on the price movement of a wide variety of financial instruments, such as stocks , forex , commodities , and fixed-income securities . In other words, an investor makes a bet based on whether they think the market will rise or fall from the time their bet is accepted. They also get to choose how much they want to risk on their bet. It is promoted as a tax-free, commission-free activity that allows investors to profit from either bull or bear markets.
Spread betting is a leveraged product which means investors only need to deposit a small percentage of the position's value. For example, if the value of a position is $50,000 and the margin requirement is 10%, a deposit of just $5,000 is required. This magnifies both gains and losses which means investors can lose more than their initial investment.
Spread betting is not available to residents of the United States due to regulatory and legal limitations.
Despite the risk that comes with the use of high leverage, spread betting offers effective tools to limit losses :
Risk can also be mitigated by the use of arbitrage, betting two ways simultaneously.
Let’s assume that the price of ABC stock is $201.50 and a spread-betting company, with a fixed spread, is quoting the bid/ask at $200 / $203 for investors to transact on it. The investor is bearish and believes that ABC is going to fall below $200 so they hit the bid to sell at $200. They decide to bet $20 for every point the stock falls below their transacted price of $200. If ABC falls to where the bid/ask is $185/$188, the investor can close their trade with a profit of {($200 - $188) * $20 = $240}. If the price rises to $212/$215, and they choose to close their trade, then they will lose {($200 - $215) * $20 = -$300}.
The spread betting firm requires a 20% margin, which means the investor needs to deposit 20% of the value of the position at its inception, {($200 * $20) * 20% = $800, into their account to cover the bet. The position value is derived by multiplying the bet size by the stock’s bid price ($20 x $200 = $4,000).
Investors have the ability to bet on both rising and falling prices. If an investor is trading physical shares, they have to borrow the stock they intend to short sell which can be time-consuming and costly. Spread betting makes short selling as easy as buying.
Spread betting companies make money through the spread they offer. There is no separate commission charge which makes it easier for investors to monitor trading costs and work out their position size.
Spread betting is considered gambling in some tax jurisdictions, and subsequently, any realized gains may be taxable as winnings and not capital gains or income. Investors who exercise spread betting should keep records and seek the advice of an accountant before completing their taxes.
Because taxation on winnings in some countries is far less than that on capital gains or trading income, spread betting can be quite tax-efficient, depending on one's location.
Investors who don’t understand leverage can take positions that are too large for their account, which can result in margin calls . Investors should risk no more than 2% of their investment capital (deposit) on any one trade and always be aware of the position value of the bet they intend to open.
During periods of volatility, spread betting firms may widen their spreads. This can trigger stop-loss orders and increase trading costs. Investors should be wary about placing orders immediately before company earnings announcements and economic reports.
Many spread betting platforms will also offer trading in contracts for difference (CFDs), which are a similar type of contract. CFDs are derivative contracts where traders can bet on short-term price moves. There is no delivery of physical goods or securities with CFDs, but the contract itself has transferrable value while it is in force. The CFD is thus a tradable security established between a client and the broker, who are exchanging the difference in the initial price of the trade and its value when the trade is unwound or reversed.
Although CFDs allow investors to trade the price movements of futures, they are not futures contracts by themselves. CFDs do not have expiration dates containing preset prices but trade like other securities with buy and sell prices.
Spread bets, on the other hand, do have fixed expiration dates when the bet is first placed. CFD trading also requires that commissions and transaction fees be paid up-front to the provider; in contrast, spread betting companies do not take fees or commissions. When the contract is closed and profits or losses are realized, the investor is either owed money or owes money to the trading company. If profits are realized, the CFD trader will net the profit of the closing position , minus the opening position and fees. Profits for spread bets will be the change in basis points multiplied by the dollar amount negotiated in the initial bet.
Both CFDs and spread bets are subject to dividend payouts assuming a long position contract. While there is no direct ownership of the asset, a provider and spread betting company will pay dividends if the underlying asset does as well. When profits are realized for CFD trades, the investor is subject to capital gains tax while spread betting profits are usually tax-free.
Spread betting is a way to bet on the change in the price of some security, index, or asset without actually owning the underlying instrument.
While spread betting can be used to speculate with leverage, it can also be used to hedge existing positions or make informed directional trades. As a result, many who participate prefer the term spread trading. From a regulatory and tax standpoint it may be considered a form of gambling in certain jurisdictions, since no actual position is taken in the underlying instrument.
The majority of U.S.-based brokers do not offer spread betting, as it may be illegal or subject to overt regulatory scrutiny in many U.S. states. As a result, spread betting is largely a non-U.S. activity.
Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future performance. Investing involves risk, including the possible loss of principal.
OddsShark Sports Betting What Is A Point Spread And How Does It Work?
A point spread in sports is a way for oddsmakers to make a matchup between two unbalanced teams more balanced by giving points to or taking points away from each team.
The favorite in a matchup, indicated by a minus (-) sign, will have a given number of points taken away from its final score, while the underdog , known by its plus (+) sign, will have the same number of points added to its final score.
Be sure to check out our sports betting glossary to assist you with some of the terms used in our sports betting guides.
NFL spread betting is probably the most common and popular way to bet on football as it adds some excitement and better odds over just picking an outright winner. If you are new to betting the NFL altogether, be sure to check out our great How to Bet on the NFL guide.
Here is an example of a point spread for an NFL game and how it would look:
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