Spread In Betting Means
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Spread In Betting Means
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What Is A Spread In Sports Betting?
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Sports betting has expanded both in the number of markets that exist and with new intricacies added to player props and live betting. But spread betting is one of the more popular forms of sports betting, and this is a sentiment that will likely never change.
Spread betting has its own allure given the simplicity of the wager type and the ease in following along during a game in the context of each spread wager. In this article, we will discuss what spread betting is and the markets available for this type of bet.
Additionally, we will identify and address some of the complexities of spread betting and some frequently asked questions regarding this betting method.
Point spreads are handicaps placed on a team based on whether they are expected to win or lose by a certain margin. Oddsmakers attempt to reach a specific number line for spreads that they believe would make the forecasted final score closest to even.
One other popular type of betting is placing wagers on the moneyline. A moneyline wager is a bet placed on who will win or lose a game or contest regardless of spread.
For example, if the Los Angeles Dodgers and New York Yankees played, and the Dodgers had a +100 odds moneyline, you would win $100 on a $100 bet. The payout is simply 1:1. A wager on the Dodgers’ side would be a winner as long as the Dodgers win the game.
This is very different from the spread, which oddsmakers set to make the teams competing as even as possible, taking into account the perceived strengths and weaknesses of each side.
When it comes to the spread, there is always a favorite and an underdog unless the uncommon occurrence of a pick’em occurs. A favorite will always be surrendering points, i.e. a -7 spread for the Buffalo Bills against the Miami Dolphins means that oddsmakers have labeled the Bills as the favorite by seven points. On the other side, the Dolphins will draw a spread of +7, meaning that oddsmakers view the Dolphins as an underdog by seven points.
The aforementioned pick’em is a situation where no spread exists because the matchup is viewed as one that is extremely close. This basically defeats the purpose of the spread and makes it so that the moneyline is the only bet available in most cases.
The Miami Heat are playing the Orlando Magic in the NBA. The Heat are listed as nine-point favorites, drawing a spread of -9. The Magic, as a result, draw a spread of +9. If the Heat win the game by more than nine points, they will be the winning side against the spread (ATS). If the Magic lose the game by fewer than nine points or win the game outright, they will be the winning side against the spread.
In the event that the final score results in the Heat winning by exactly nine points, i.e. 112-103, neither side of the spread will win and will result in a “push.” This returns all wagers to bettors on the spread.
Point spread bets are appealing because of their simplicity. In addition to the spread number, there are also odds attached to each spread. The vigorish, also known as juice, can be seen on each spread bet before placing your wager.
The vig can be thought of as the book’s fee for taking the wager.
Arguably the best thing about spread betting is that the odds are normally between the -120 and +100 odds range. This ensures that bettors are laying far less juice to make these types of bets than they otherwise would on something like a lopsided moneyline.
A +7 spread is very commonly seen in the NFL due to the scoring of a touchdown and a successful extra point. It can be seen in other sports, as well. If the spread is set at +7, this means that to cover, the underdog must either win the game outright or lose by fewer than seven points. For the favorite to cover, they must win by more than seven points.
A +1.5 spread is less common compared to other spread numbers across all sports given what the oddsmakers are implying when attaching it to a game.
This means that the underdog must win outright or lose by exactly one point to cover the spread. Alternatively, a +1.5 spread means that the favorite must win by two points, runs, etc. or more. The +1.5 is the standard “run line” in MLB betting.
Many baseball games are decided by fewer than two runs.
In the event that the underdog only loses by one, they would be doing what is called “winning by the hook.” This refers to the fact that a side wins against the spread by exactly 0.5 points which is quite common given how excellent oddsmakers are in getting their predictions close to the final score.
As previously mentioned, spread bets have odds attached to them that are usually quite reasonable, existing in the range of -120 to +100 in most cases. Depending on whether you are a bettor who looks to win one unit on a bet or you wager a unit on all bets, this has a significant impact on how much you can make on an individual wager against the spread.
A unit is simply a predetermined dollar figure for your standard wager. If you set aside a certain amount of money for sports betting, a unit is typically 1% of your sports betting funds. This helps bettors minimize risk on any one bet, as sports betting has high variance.
If a bettor with a $100 unit size wagers on a -120 odds spread, they would be placing either a $120 bet to win $100 or a $100 bet to win $83.33.
Let’s now discuss some spread betting examples and intricacies of each major North American sports league. Each league is different given the way scoring is done in each sport, creating somewhat of a learning curve for spread betting.
Betting on spreads in the NFL is one of the most popular ways of utilizing spread betting in the United States. The typical spreads available are first quarter, first half and full game spreads with some bettors also engaging in second half spreads. The NFL has a standard structure for this betting market, unlike some of the other major sports leagues.
An example of an NFL spread wager would be to bet the full game spread of the Arizona Cardinals +7.5 points against the Los Angeles Rams. This would require the Cardinals to win the game outright or lose by less than a touchdown.
Similar to the NFL, NBA spread betting is fairly standard. The same methods are available such as quarter, half and full game spreads. Bettors have proven to engage more in the quarter-by-quarter betting as opposed to the NFL given the fast-paced nature of basketball.
For example, a bettor can place a wager on the first quarter between the Miami Heat and Boston Celtics. The Celtics are favored by two points against the spread. Bettors would be forced to either back Celtics -2 or Heat +2 with an exact difference of two points representing a push.
MLB betting has a very different structure than the NFL and NBA because scores and winning margins are often low. There are technically no “spreads,” but rather a “run line.” Unlike most other sports, MLB run lines typically have odds that can reach as high as -200 or +200 depending on what direction the game is predicted to go.
If the New York Yankees are matching up with the Boston Orioles and the Yankees have a -250 moneyline attached to them, their run line will look something like “Yankees -1.5 at -120 odds.” On the other hand, if the Yankees were to play the Los Angeles Dodgers and were just -115 favorites, their run line would look something more like “Yankees -1.5 at +190 odds.”
NHL “puck lines” operate very similarly to the way MLB run lines do. However, the main difference with hockey is that the average game has far fewer goals scored than a baseball game has runs scored.
If the Nashville Predators play the Anaheim Ducks and the Predators are -200 favorites, their puck line would likely look something along the lines of “Predators -1.5 at -110 odds.” However, if the Predators were to play the Lightning at -115 favorites, the puck line would look something closer to “Predators -1.5 at +190 odds.”
Betting on the spread can be an enjoyable time for any bettor as it adds a wrinkle into the experience that bets on markets like moneylines do not provide. Whether you are looking to back that massive underdog or the close home favorite, doing the research can maximize your profits when engaging in spread betting.
All in all, wagering on spreads is one of the simplest and purest forms of sports betting and should be viewed as one of the best options holistically.
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Daniel Preciado studied sport analytics at Syracuse Univeristy and has covered sports betting since 2018 for The Game Day, The Action Network and Fansided.
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.
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 refers to speculating on the direction of a financial market without actually owning the underlying security.
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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 share on 1,000 shares. Note here several important points. Without the use of margin, this transaction would have required a large capital outlay of £193k. Also, normally commissions would be charged to enter and exit the stock market trade. Finally, the profit may be subject to capital gains tax and stamp duty.
Now, let's look at a comparable spread bet. Making a spread bet on Vodafone, we'll assume with the bid-offer spread you can buy the bet at £193.00. In making this spread bet, the next step is to decide what amount to commit per "point," the variable that reflects the price move. The value of a point can vary.
In this case, we will assume that one point equals a one pence change, up or down, in the Vodaphone share price. We'll now assume a buy or "up bet" is taken on Vodaphone at a value of £10 per point. The share price of Vodaphone rises from £193.00 to £195.00, as in the stock market example. In this case, the bet captured 200 points, meaning a profit of 200 x £10, or £2,000.
While the gross profit of £2,000 is the same in the two examples, the spread bet differs in that there are usually no commissions incurred to open or close the bet and no stamp duty or capital gains tax due. In the U.K. and some other European countries, the profit from spread betting is free from tax.
However, while spread bettors do not pay commissions, they may suffer from the bid-offer spread, which may be substantially wider than the spread in other markets. Keep in mind also that the bettor has to overcome the spread just to break even on a trade. Generally, the more popular the security traded, the tighter the spread, lowering the entry cost .
In addition to the absence of commissions and taxes, the other major benefit of spread betting is that the required capital outlay is dramatically lower. In the stock market trade, a deposit of as much as £193,000 may have been required to enter the trade. In spread betting, the required deposit amount varies, but for the purpose of this example, we will assume a required 5% deposit. This would have meant that a much smaller £9,650 deposit was required to take on the same amount of market exposure as in the stock market trade.
The use of leverage works both ways, of course, and herein lies the danger of spread betting. As the market moves in your favor, higher returns will be realized; on the other hand, as the market moves against you, you will incur greater losses. While you can quickly make a large amount of money on a relatively small deposit, you can lose it just as fast.
If the price of Vodaphone fell in the above example, the bettor may eventually have been asked to increase the deposit or even have had the position closed out automatically. In such a situation, stock market traders have the advantage of being able to wait out a down move in the market, if they still believe the price is eventually heading higher.
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.
Arbitrage opportunities arise when the prices of identical financial instruments vary in different markets or among different companies. As a result, the financial instrument can be bought low and sold high simultaneously. An arbitrage transaction takes advantage of these market inefficiencies to gain risk-free returns.
Due to widespread access to information and increased communication, opportunities for arbitrage in spread betting and other financial instruments have been limited. However, spread betting arbitrage can still occur when two companies take separate stances on the market while setting their own spreads.
At the expense of the market maker, an arbitrageur bets on spreads from two different companies. When the top end of a spread offered by one company is below the bottom end of another’s spread, the arbitrageur profits from the gap between the two. Simply put, the trader buys low from one company and sells high in another. Whether the market increases or decreases does not dictate the amount of return.
Many different types of arbitrage exist, allowing for the exploitation of differences in interest rates, currencies, bonds, and stocks, among other securities. While arbitrage is typically associated with risk-less profit, there are in fact risks associated with the practice, including execution , counterparty, and liquidity risks. Failure to complete transactions smoothly can lead to significant losses for the arbitrageur. Likewise, counterparty and liquidity risks can come from the markets or a company’s failure to fulfill a transaction.
Continually developing in sophistication with the advent of electronic markets, spread betting has successfully lowered the barriers to entry and created a vast and varied alternative marketplace.
Arbitrage, in particular, lets investors exploit the difference in prices between two markets, specifically when two companies offer different spreads on identical assets.
The temptation and perils of being overleveraged continue to be a major pitfall in spread betti
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