Spread Betting Margin Explained

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Spread Betting Margin Explained
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Spread betting is a leveraged traded product and spread betting providers will insist that you deposit a certain percentage of the total market exposure you take with them before they will permit you to open a trade. This deposit is referred to as margin and acts as a guarantee that you will honour the contract. Margin is sometimes referred to as the ‘notional trading requirement’, or NTR for short.
To open a spread betting trade, you need to deposit with the spread betting company a margin amount, which will be a percentage of the total value of the spread trade. For example, if you buy a spreadbet over ABC stock, you may need to pay a margin equal to 5% of the current ABC’s share price. The initial margin amount will be withdrawn from your account by the spread betting provider when you place the trade.
Margin requirements for each market a spread betting company offers can be found by clicking on the information icon which is located next to the instrument you’ve chosen. Alternatively, you can refer to the provider’s Market Information Sheet. Different spread betting providers will have different margin requirements for spreadbet over the same underlying asset. Margin requirements will tend to be higher for spreadbets over stocks than for other assets.
“The amount you’ll need to deposit with the spread betting provider depends on the underlying financial instrument and the more liquid the market you intend to trade, the less you’ll need to put down.”
For instance, a currency spread bet might only require a 1% margin, an index bet might carry a 5% margin while FTSE 100 blue-chip stocks usually require a 10% margin. On the other hand AIM companies with low capitalisations might require margins of 25% and more.
Margin trading is all about leverage and gearing. Spread betting is geared which means you do not have to pay the full price of the underlying stocks. The only requirement is that you deposit an initial deposit referred to as the ‘initial margin’.
Financial spread betting is a very good example of margin trading. The spread betting provider will decide on the margin requirement you are required to deposit to open a trade. So for instance, if stocks in William Hill are trading at 156.10p and you wish to buy 5000 shares, instead of having to pay the full purchase price (156.10 x 5000) of GBP7,805 you might only have to put down 10% margin, in which case you would only have to tie up £780.5 of your funds.
This also means that spread betting being a margin traded product, it allows for a much greater exposure for a given deposit. Rather than only buying 500 shares, you could deposit the margin and have exposure for 5000 shares!
Therefore you might only need 1000 quid to purchase spread betting positions in different stocks up to a value of, say £10,000. If your investment rises to £12,000 – equalling a 20% rise in the value of the position – you will in fact make an incredible 200% return on your initial investment, as you only invested £1,000 initially.
The good and bad element in it is the leverage involved….
The average deposit you require to buy a spreadbet rather than, for instance, a conventional share purchase is between about 10 per cent and 35 per cent, whereas when you buy a share you have to stump up 100 per cent of the purchase price.
The risk here should be clear. With such generous margins, it might look tempting to take on a much greater exposure and should the market start moving against your position, it means that you will still be liable in the same way as if you have bought these shares and paid the full price. If a position keeps going the wrong way, your broker will ask you to top up the account to maintain the margin requirement, referred to as a ‘margin call’. So, you really have to use judgement and utilise margin with care and trade with a disciplined approach so as to avoid any nasty surprises!
Let’s take the case where you decide to place a spreadbet on Company XYZ with a total exposure of £10,000. If the trade comes with an initial margin rate of 10%, you would need to deposit an initial £1000 into your spread betting account to open the trade. However you are still exposed to the full value of the trade i.e. £10,000. This means that should your trade moe against you, you run the risk of losing an amount exceeding the initial £1000 deposit and may therefore be required to put up more funds at short notice to keep the position open.
So even though a spread betting provider might only require you to put up just 5% margin down for a bet on a stock, generally it is wiser to put down more. And by more I mean at least 15% and setting stops at around 10%. If you deposit only 5% and the markets move against your position, a stock could easily go down 5% which would wipe you out in no time! And then should the stock bounce back, you’ll end up not only stopped out and lost your 5% deposit, but your trading mindset would have been dealt a blow!
Remember that margin is there to help you spreadbet responsibly, ensuring that you never overstretch your financial means. It is important to note that each market has a different margin requirement and that in general margin requirements are a good measure of a market’s volatility. Generally speaking, the more you need on deposit with the provider to open a position, the more volatile the market is considered to be.
The main foreign exchange pairs and the larger indices will normally have very low margin rates of 1% to 2%. For example, most traders tend to start with the FTSE 100 index or its component shares, as they tend not to require too much margin. The margin requirement for a £1 bet on the FTSE 100 index could be anything from £30 to £150 (different providers offer different margins for the same markets), whereas a £1 bet on the Nikkei might mean a deposit of £300 to £500 is required. The usual margin requirement for UK shares varies between 5% and 10% for the large and mid-cap stocks of the FTSE 350. Smaller caps including those listed on Aim are usually more volatile and less liquid, which is why they often need a deposit of 25% or more.
Remember that you can reduce your margin requirement when you go over certain thresholds by placing a guaranteed stop loss even though your buy price is minutely increased. It is also worth noting it is not unheard of spread betting providers upping margin rates at short notice – needless to say if you hold spread bets where the margin rating increases, you may be at risk of your positions being closed if you don’t have sufficient free cash available.
Spreadbets also allow you to make money from falling markets by going what is called ‘short’ but again, that’s something that needs a fair bit of homework.
Note: Bear in mind that most people live on margin. Buying a house with a mortgage is little different from spreadbets – less volatile usually, but far harder to get out of if you have to.
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Like to bet on sports but not a big fan of doing semi-complicated math? Then point-spread wagering was made for you.
Simple addition and subtraction—that’s all you need to know to grasp the nuances of spread betting, which is by far the most popular form of wagering for two of North America’s most popular sports: football and basketball (both college and pro).
What follows is a primer on how to wager on point spreads, including examples from multiple sports.
A point spread is nothing more than a bookmaker giving one team (or player) a head start in a game or event. In sports betting, this head start comes in the form of points (football, basketball), runs (baseball), goals (soccer, hockey), strokes (golf) and games or sets (tennis).
The idea is simple: If you wager on the team receiving the head start, you’re wagering on the underdog and hoping for one of two results: Either the team wins outright, or it keeps the final margin within a specific number of points/runs/goals. That number, established by oddsmakers, is called the point spread. 
Conversely, if you bet on the team that starts from behind, you’re betting on the favorite, which needs to win by a margin greater than the point spread to cash your wager.
The point spread number in any game/event is always the same for both teams. The only difference: The spread associated with the favorite is denoted with a minus (-) sign, while the spread attached to an underdog carries a plus (+) sign.
Here’s how a point spread is expressed in an NFL game:
In this example, if you bet the Titans on the spread, you’re “getting” 3.5 points right from the start. You can win that bet one of two ways: The Titans defeat the Colts (win outright) or lose by one, two or three points. 
A wager on Indianapolis means you’re “giving” 3.5 points—so before the game even kicks off, you’re losing 3.5 points to zero. That means the Colts not only must win the game, but they have to prevail by a margin of at least four points.
In this scenario, if the final score is Colts 23, Titans 21, Tennessee would “cover” the 3.5-point spread. However, if the Colts prevail 27-21, they would “cover” the spread.
Regarding spread betting, remember this: If you bet on the favorite (-3.5), you’re “giving away” those points throughout the entire contest. If you bet on the underdog (+3.5), you’re “getting” (or “receiving”) those points from start to finish.
Point spreads are expressed two different ways: as whole numbers (-6, -10, +13, +21) and fractions/decimals (+4.5, -8.5, +11.5).
Any point spread that has that extra half-point (or half-run, half-goal, etc.) means no matter what the game/event outcome is, there will be a definitive winner and loser from a betting perspective. 
However, when that half-point—referred to as “the hook” in betting parlance—is absent from a point spread, it’s possible the final score on the field could result in a tie (or “push”) for wagering purposes.
Here are two NBA examples involving a hypothetical Milwaukee Bucks vs. Phoenix Suns matchup:
Betting result: Bucks spread bettors lose (didn’t win by at least six points); Suns bettors win (lost by fewer than six points)
Betting result: Push (the game was decided by the exact point spread of 5 points)
In the latter situation, all point spread bets are refunded. That is, everyone who wagered on Bucks -5 would get their money back, as would everyone who wagered on Suns +5.
It’s not uncommon for point spreads to move up and down—and it can happen multiple times in the span of hours or even minutes. This “line movement” tends to occur most frequently the closer you get to game time.
Why do sportsbooks make these adjustments? There are numerous reasons, but here are the three most common:
Lopsided betting action: A sportsbook’s ultimate goal is to have the same amount of money bet on both sides of every game/event (thus limiting the book’s financial liability).
So let’s say a bunch of five-figure wagers come in on a 4-point underdog, and the other side (4-point favorite) has only received a few hundred dollars in bets. In this case, the book might adjust the point spread to -3.5/+3.5 or even -3/+3 to balance out the action (that is, attract more money on the favorite and less on the underdog).
Injuries/suspensions/trades/rest: When news breaks that a key player won’t be suiting up—the quarterback in football; the starting pitcher or best hitter in baseball; the top player in basketball; the goalie in hockey—you can be sure oddsmakers will adjust the point spread. How much depends on the missing player’s worth to his/her team.
Weather: Obviously, this pertains to outdoor sports only, but inclement weather—wind, rain, snow, etc.—can lead to a point spread shift. That said, poor weather more often leads to line moves with totals (i.e., the Over/Under) than spreads.  
In almost all instances, whenever making a point spread wager, bettors must pay a fee called the “vigorish” (also known as “the vig” or “juice”). This fee is displayed in the same manner as moneyline odds.
The standard odds for spread wagers is -110 for both the favorite and the underdog. That means no matter what side you’re taking, when the vig is -110, you must wager $110 for every $100 you want to win, $11 to win $10, or $1.10 to win $1. 
(Note: Some sportsbooks won’t even list “-110” on their betting boards and apps—it’s just assumed that’s the vig.)
Sometimes, oddsmakers will adjust the juice rather than move the point spread up or down a half-point (or more). 
So let’s say the New England Patriots are facing the Miami Dolphins; the point spread is Patriots -3.5/Dolphins +3.5; and most bettors are wagering on New England. Instead of shifting the spread to Patriots -4/Dolphins +4 (with -110 odds on both sides), the sportsbook might retain the -3.5/+3.5 spread number but move the vig to Patriots -120/Dolphins +100. 
In this instance, bettors backing New England have to risk $120 to win $100 and need the Patriots to win by at least four points. Dolphins bettors would risk $100 to win $100 (even-money odds) and need Miami to win the game or lose by no more than three points.
The answer to this question: It depends on which side wins the wager, the bettor or the book. When bettors come out on top—no matter if it’s a spread or moneyline wager—they get the juice back as part of their winnings. But when a bettor loses, the sportsbook retains the vig (think of it as the “cost” of doing business with the sportsbook).
Here are two examples that illustrate where the vig ends up:
Matchup: Baltimore Ravens vs. Pittsburgh Steelers
Point spread: Ravens +6.5 (-110)/Steelers -6.5 (-110)
The wager: $110 (to win $100) on Steelers -6.5
Betting result: Bettor wins and collects $210 (original $110 wager, plus $100 in winnings)
Matchup: Baltimore Ravens vs. Pittsburgh Steelers
Point spread: Ravens +6.5 (-110)/Steelers -6.5 (-110)
The wager: $55 (to win $50) on Steelers -6.5
As we’ve detailed, spread betting with football and basketball is as basic as it gets. You’re either “giving” points (betting on the favorite) or “receiving” points (betting on the underdog). The rest is simple math (add to/subtract from the final score).
With other sports, spread betting is a bit different (yet still not all that difficult to comprehend).
Most bettors who wager on the NFL, NBA, and college football and basketball stick with the point spread. However, the moneyline is usually the preferred format for sports like the NHL, MLB and soccer. 
The main reason: Football and basketball are higher-scoring sports that often feature final scores with wide margins (35-17, 122-101, etc.). Point spreads help tighten those margins in the betting market.
Conversely, baseball, hockey and soccer are traditionally lower-scoring sports with tighter victory margins (6-4, 4-3, 1-0, etc.). As a result, the “point spread” is always a low number.
In baseball, the spread is referred to as the “run line” and is always listed as -1.5 (favorite)/+1.5 (underdog). In hockey, it’s called the “puck line,” and just like baseball, it’s always -1.5/+1.5. 
For a run line/puck line favorite to “cover the spread,” it must win by multiple runs/goals, while a run line/puck line underdog must win outright or lose by no more than one run/goal.
As for soccer, the spread is known as the “goal line”. Considering that fútbol is the lowest-scoring team sport on the planet, it shouldn’t be surprising to learn that the goal line is usually listed at -0.5/+0.5. 
Here’s what that means: If you bet a favorite on the goal line (-0.5), it must win the match—if the final score is a tie, you lose your wager. But if you bet a goal-line underdog, you can cash with an outright win or a tie (because you’re “getting” half a goal).
As with football and basketball, spread wagering in other sports comes with vigorish attached. The key difference? Whereas the vig in football and basketball spread betting is most often -110 on both sides, in the other sports, it can vary greatly. And it’s all correlated to the moneyline odds.
Here are two examples (one from MLB, one from the NHL):
If the moneyline for a Texas Rangers-Houston Astros game is Astros -220/Rangers +190, the associated run line probably would be Astros -1.5 runs (-115)/Rangers +1.5 runs (-105).
Perhaps you like the Astros’ chances to beat the Rangers on this day but aren’t interested in laying -220 odds on the moneyline (that is, betting on Houston to win the game, regardless of the victory margin). You can instead choose to bet the Astros on the run line at -115 odds. 
So you’ve essentially cut the odds price in half (from -220 to -115), but here’s the tradeoff: Houston has to win by at least two runs for you to win your bet.
Switching to the NHL, let’s say the moneyline in a Vegas Golden Knights-Colorado Avalanche game was tight, something like Vegas -120/Colorado +110. The puck line odds would be much more extreme, roughly Golden Knights -1.5 goals (+170)/Avalanche +1.5 goals (-190).
Why? Because oddsmakers believe this contest is a virtual toss-up (hence the tight moneyline odds). The puck line odds tell you it’s more probable that Vegas wins by exactly one goal (or loses outright) than wins by multiple goals.
Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners .

Matt Jacob is a freelance writer and editor based in Las Vegas. He has written/edited for multiple print publications and online platforms, including the Las Vegas Review-Journal, The Washington Post, UNLV communications, VegasSeven magazine, Premier Boxing Champions and, most recently, Props.com.


Brian Pempus has covered the U.S. gambling indusry since 2009, starting with Card Player Magazine in Las Vegas. He was later deputy editor of sports betting at Better Collective and managing editor at The Game Day, before joining Forbes Advisor in 2022.



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