Spread Betting Formula

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Spread Betting Formula

Calculating Profit And Loss In Spread Betting


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One of the key advantages of spread betting for individual traders is that it represents a much more straightforward transaction than many other investment styles. When looking at the spreads , it is easy to determine how successful your position has been by reference to your original stake amount, such is the degree of ease in reading spread betting transactions. Likewise, on the down side it is possible to quickly and easily calculate your loss at certain market levels – essential in guiding the trader as to the best stops and limits to put in place as part of risk mitigation.
Knowing how to calculate your potential profits and loss from a given transaction is much more than a mathematical bonus. In actual fact, being able to calculate the outcome at given price points is a distinct advantage, and enables you to make trading decisions based on financial forecasts rather than leaving it up to chance. As part of a rationed and logical trading strategy, knowing the arithmetic of your open positions is a vital tool in breeding consistency and ensuring you keep your eye on the ball at all times.
A significant benefit of spread betting is that the arithmetic in calculating winnings and losses is easily done, making it much easier than many alternative investment types to do the maths. The variables you need to know in order to calculate your profit from a transaction are as follows:
Your original buy/sell price: the price at which you bought (or sold, if you’re going short) the market.
Your stake: which will be factored in to the calculation as a multiple to deliver your profit portion.
Projected end prices: the price points for which you’re looking to calculate your potential profit – e.g. a 1% rise, 2% rise and 5% rise in the market value.
Any other costs: any other commissions or trading costs that must be factored in.
With these variables at your disposal, the calculation becomes a fairly straightforward one, and provided you understand the mechanics of the arithmetic it is something you can calculate mentally without too much trouble.
To start with, take the projected end price you’re calculating for and subtract from that your original buy price and any additional trading costs you’re factoring in for that transaction. Then, multiply your stake amount by the difference between the original price and the end price to calculate your potential return at a given closing price point.
While in a strict accounting sense you might normally attribute a portion of other costs (such as subscriptions, Internet connection etc.) on a per transaction basis, it’s probably best for the ease of calculation that we forget about these cost bases and calculate trading profit.
Here’s a quick numerical example of calculating spread betting profits in action.
Your market is priced at 98-102, which you decide to buy at 102 at a stake of £10 per point. You want to calculate your profit if the market rises to 130, with no additional costs to factor in.
(Projected price – (Original price + costs)) x Stake = Profit
Remember that when it comes to spread betting, your liability doesn’t end when your trading account runs out. It doesn’t even end when your bank account runs out – you are personally liable, even though your debts may be incurred online, and the broker will chase you for repayment of the relevant transaction amount. Therefore, it’s crucial to make sure you have a firm grasp on your exposure to loss, in order that you can take steps to minimise this liability.
Calculating your potential losses at any given price point is simply the inverse of the profit calculation – by calculating the difference between the buy price and the closing price and multiplying by your stake, you generate the total loss figure at a given price point.
Carrying on the above numerical example, but supposing you want to calculate your loss is the market falls to 76.
(Original price – (Projected price + costs)) x Stake = Loss
One of the most important tools for spread bettors by far is the stop loss, and being able to calculate your losses quickly off the top of your head allows you to get a better feel for where your stop loss might be placed. It is always advised to use stops to minimise your exposure to risk – the downsides are far outweighed by the positives of having this safeguard in place. By calculating where your limit for losses lies, and on reflection of the behaviour of the given market you’re trading, you can better determine how to most effectively reduce your downside exposure.
One of the core benefits of spread betting is that earnings are totally uncapped (the same applies to losses, although some brokers provide negative balance protection), with the potential for traders to ride the market for as long as they like. This feature of spread betting makes spread betting inherently attractive as a trading style, with every single upwards point an extra multiple of your initial stake.
And traders should have no fears about their brokers capping winnings – remember that brokers have your position covered, either through other traders or hedging on the futures market, and so prefer traders to succeed. After all, successful traders are likely to place larger wagers, and execute more frequent trades, which will all contribute to the bottom line of the broker.
Independent Investor is a news and educational portal covering latest events in the world of trading and investment. Information on this website is for informative purposes only. Between 74-89% of retail investor accounts lose money when trading CFDs, forex, and spread betting. You should consider whether you can afford to take the high risk of losing your money. Independent Investor offers an unbiased and independent broker comparison service, but we may receive compensation from the listed brokers.

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:
As you can see, Dallas is the 4.5-point favorite, which means the Cowboys would need to win the game by five points or more to win the bet. Conversely, New York is a 4.5-point underdog, which means to win the bet the Giants would need to win outright or not lose the game by more than four points.
If the Cowboys win 20-17, they win by three points and do NOT cover the 4.5 points, but the Giants have “covered the spread” by staying within 4.5 points. 
Point spread wagers often will be put into parlays in which you make multiple bets on one slip for a larger payout. If you have a few games that you’d like to wager on and want to see how a payout changes by adding or subtracting games, feel free to play around with our odds calculator to help you learn how odds work.
There are certain point spreads that bettors should be aware of that are known as “ key numbers .” These spreads are directly related to how points are scored in football such as a field goal (three points) or a touchdown (seven, assuming a successful one-point conversion). The three main key numbers in NFL point spread betting are 3, 7 and 10, representing a field goal, a touchdown and a field goal plus a touchdown.
The two most common margins of victory are three and seven points because of the type of scoring in the NFL. This is why you should shop around at different sportsbooks to find better lines to maybe gain an edge over the key numbers like getting a +3.5 spread as opposed to just +3 – you can get a quick look at the different books at our NFL odds page .
You can also “buy” points with a “ teaser bet ” in which you can move a +7 line to +8 but the odds may shift from -110 on the +7 to -135 at +8, meaning less of a return on your winning ticket. You can have key numbers on OVER/UNDER totals as well.
The most common betting line for a point spread is -110. A -110 line on either side is like paying a tax or commission to the sportsbook. Bettors would pay 10 percent (aka juice) to the sportsbook, which is essentially a fee for brokering the wager. So, the -110 indicates that a bettor must risk $110 to win $100. Some sportsbooks will even reduce the juice for you, which means you can earn the same $100 payout but risk less money to do it.
For example, if you see -7.5 (-107), then you only need to wager $107 to win $100 (saving you $3). If you see -7.5 (-102), then you only need to wager $102 to win $100.
There are three potential outcomes of your point spread wager: you win, you lose or you push (a tie). Typically, a point spread has odds of -110 for either side of the bet. In the example above between the Cowboys and Giants, the point spread is 4.5 points, while the odds are -110, meaning you would have to wager $110 to earn a profit of $100, or a profit of $0.91 for every dollar you bet.
A losing bet is quite simply you betting on the Cowboys -4.5 and they only win by four, for example. You lose the money that you placed on that bet.
A push wouldn’t happen in the example above because a team can’t win by half a point. It is very common, though, to have a betting line of +3/-3. Let’s say a favorite wins by exactly three. That is called a push and you simply get your money back with no profit and no loss.
PK or Pick’em means that the matchup is so close that there’s neither a favorite nor an underdog. Whatever team you pick to win when betting on the point spread simply has to win the game and the margin of victory doesn’t matter. In these cases, there may not even be a point spread available for the game and you can only bet on the moneyline .
This is a very common occurrence in sports betting and sportsbooks have the full right to shift the spread or odds for any given match prior to its start. Many factors can influence a change of the spread such as injuries, the number of bets coming in for either team or the weather, to name a few. Depending on the timing of placing the bet, the bettor can also have an advantage or a disadvantage depending on which way the spread has shifted.
Here is an example of a change in the spread:
If bettors had wagered on Dallas on Monday, they would be at a disadvantage compared to bettors who waited until Thursday because the Thursday bettors now only need Dallas to win by four points instead of five. But it can also go the other way:
If bettors had wagered on Dallas on Monday, they would now have the advantage over the bettors who waited until Thursday because the Thursday bettors need Dallas to win by eight points or more instead of only five.
Yes, in fact, sportsbooks also release spreads for different points in the match like after the first quarter or first half, which is called live betting or in-game betting . Oddsmakers will set spreads for those different checkpoints and it’s up to you as the bettor to determine which team will lead or trail by a certain number of points after that unit of time.
Here is an example of a first-half spread:
As you can see, Dallas is a 2.5-point favorite to lead the first half by three points or more whereas New York is a 2.5-point underdog, which means the Giants would need to be ahead or not trail by more than two points at the end of the first half.
The popularity of the point spread bet in the NFL is equally shared by NBA bettors and it works essentially the same way. When Giannis Antetokounmpo and the Milwaukee Bucks tip off at Madison Square Garden against the New York Knicks, the Bucks are going to be -800 on the moneyline but may have a point spread of -13.5 points with odds of -110, with the Knicks coming back at +13.5 with a -110 line.
As seen in the NFL with line movement throughout the week, in basketball, you’ll see the line movement occur much faster in a shorter time frame. When we looked at key numbers in the NFL, it was in regard to scoring. A similar approach can be taken in the NBA but it’s more connected to possessions. Look for key numbers such as five and seven because they tend to represent two- and three-possession games.
Be sure to check out our Basketball Betting News and our How to Bet on the NBA guide for more options and assistance in getting you in on the action for basketball.
A puckline is what a spread is called in the NHL, while a runline is associated with MLB betting. In both cases, the spread is almost always -1.5 for the favorite and +1.5 for the underdog, but the betting odds fluctuate a lot more than in NBA or NFL point spreads because the spread doesn’t usually change. There are instances in both the NHL and MLB where you see a 2.5-point runline or puckline but those are few and far between, typically between your league leader and a cellar-dweller.
A point spread bet is also referred to as betting the spread or handicap betting. Point spread betting is a sports betting market in which a team either has to win by a specific number of points or goals, or not lose by a specific number of points or goals.
If New York is +2.5, that means they are the underdog and have been spotted or given 2.5 points. If New York loses by two or fewer points, then it is a winning bet. If New York pulls off an outright upset, then that is also a winning wager.
When it comes to point spread betting, and you bet against the spread, it won’t be enough for the favorite to win the game outright. The favorite would have to win by more than a specified number of points or goals (the spread) in order for that team to cover the point spread.
Odds Shark Staff Thu, Aug 11, 12:26pm
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Dan Blystone is the founder and editor of TradersLog.com, as well as the founder of the Chicago Traders Meetup Group.


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Spread betting allows traders to bet on the direction of a financial market without actually owning the underlying security. Spread betting is sometimes promoted as a tax-free, commission-free activity that allows investors to speculate in both bull and bear markets, but this remains banned in the U.S. Like stock trades, spread bet risks can be mitigated using stop loss and take profit orders.

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Spread betting is a derivative strategy, in which participants do not own the underlying asset they bet on, such as a stock or commodity. Rather, spread bettors simply speculate on whether the asset's price will rise or fall, using the prices offered to them by a broker.


As in stock market trading, two prices are quoted for spread bets—a price at which you can buy (bid price) and a price at which you can sell (ask price). The difference between the buy and sell price is referred to as the spread. The spread-betting broker profits from this spread, and this allows spread bets to be made without commissions, unlike most securities trades.


Investors align with the bid price if they believe the market will rise and go with the ask if they believe it will fall. Key characteristics of spread betting include the use of leverage, the ability to go both long and short, the wide variety of markets available, and tax benefits.


If spread betting sounds like something you might do in a sports bar, you're not far off. Charles K. McNeil, a mathematics teacher who became a securities analyst—and later a bookmaker—in Chicago during the 1940s has been widely credited with inventing the spread-betting concept. But its origins as an activity for professional financial-industry traders happened roughly 30 years later, on the other side of the Atlantic. A City of London investment banker, Stuart Wheeler, founded a firm named IG Index in 1974, offering spread betting on gold. At the time, the gold market was prohibitively difficult to participate in for many, and spread betting provided an easier way to speculate on it.

Despite its American roots, spread betting is illegal in the United States.

Let's use a practical example to illustrate the pros and cons of this derivative market and the mechanics of placing a bet. First, we'll take an example in the stock market, and then we'll look at an equivalent spread bet.


For our stock market trade, let's assume a purchase of 1,000 shares of Vodafone (LSE: VOD ) at £193.00. The price goes up to £195.00 and the position is closed, capturing a gross profit of £2,000 and having made £2 per s
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