What Happens Betting Spread If Level

What Happens Betting Spread If Level

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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.

An employee stock option (ESO) is a grant to an employee giving the right to buy a certain number of shares in the company's stock for a set price.

Options are financial derivatives that give the buyer the right to buy or sell the underlying asset at a stated price within a specified period.

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Quadruple witching refers to a date on which stock index futures, stock index options, stock options, and single stock futures expire simultaneously.

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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 betting. However, the low capital outlay necessary, risk management tools available, and tax benefits make spread betting a compelling opportunity for speculators.

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Home / Betting Guides / Line Movement in Sports Betting
1 September | 03:30 | Milorad Matejic
Line movement refers to when the odds or the point spread for a bet changes leading up to the game and it’s worth paying attention to.
Line movement can help get the best possible price on your wagers and it can also give you valuable information on how to bet.
We’ll get into all the reasons betting lines move in more detail in this guide but most commonly, it happens when more money is being bet on one side of the bet compared to the other.
This page is your guide to line movements and how it relates to sports gambling.
Line movement matters. Knowing the best time to place your bet can be the difference between a modest win and a big profit. As you become more confident and experienced in sports betting, considering line movement will become second nature.
You will get a feel for how lines are likely to move and learn when the best time to place your bets is. Using line movement to your advantage is a great way to maximize betting profits.
Depending on which side of the bet you want to take, you may be better off waiting until the line has moved in your favor. Alternatively, it is possible you should get in on the action as early as possible if you think the line will move against you.
As you will see, there are ways to predict which way the line will move, and when you should place your bet.
The term “lines” is used a lot in sports betting and it can refer to odds on a bet, or specific lines like the point spread or the over/under total.
These lines can change drastically between the time they are initially set by the sportsbook up until when the game actually begins. There are lots of reasons betting lines can move but let’s start with the most common.
In general, sportsbooks like to have as close to an even amount of action on each side of a bet. This means that regardless of who wins, they will make a profit on the commission they charge, which is the cut the sportsbook takes of every bet before it is paid out.
If there is way more action on one side of the bet, the sportsbook risks losing money when that side of the bet ends up winning. The way that the sportsbook can encourage an even amount of money being bet on both sides is by making the less popular side more attractive. This is done by changing the payout odds or shifting the point spread or total.
Line movement can take different forms:
Basically, any time you notice that the odds, points or totals in a bet have changed, that means the line has been moved.
Line movement can occur at any time, and it occurs as a reaction – usually to a majority of money being placed on one side of the bet, but also to external factors such as injuries or suspensions.
Generally, once the betting lines are opened there is a flurry of bets from the public which indicates which side of the bet most people like. After that initial flurry, it is common that the lines will be moved.
Here is an example of how a typical line might move:
In this case, the line movement has come in the form of a change in the point spread.
The Chiefs started out as favorites, with -3.5 points. When the line moved they became even greater favorites, moving to -5 points. Conversely, the Ravens became an even bigger dog.
In this case, it is likely that a lot of people bet on the Chiefs when the line opened. This leads the sportsbook to give more points to the Ravens, to entice people to bet on them and balance the action.
In this bet, the odds have remained the same (-110) and only the point spread has changed.
Another way the line could move is that the odds change on the money line, without the point spread being considered. That could look like this:
In this example, a $100 bet on the Ravens would pay an extra $25 if you had waited until the line moved.
By making one side of the bet more appealing, the sportsbook can entice more people to bet on it. In the next section, we’ll explain why sportsbooks change the odds.
As we have seen, generally lines move because a large majority of money has been placed on one side of a single bet. The sportsbooks don’t like this because if all those bets win, they will lose money.
When the sportsbook wants to “balance the books” it will move the line to make that side of the bet more attractive.
In the example above, the Chiefs started out as favorites and attracted a lot of bets. This would have made the sportsbook concerned that they would lose money if the Chiefs won. In response, they gave the Ravens even more points so that more people would bet on them.
The most common reason for line movement is that the vast majority of public bettors are betting in one direction. Generally, the highest number of people betting on one side means that that side has the highest amount of money.
Another possibility, particularly when the line moves erratically or unexpectedly, is that a lot of money has been placed by a small number of bettors. This tends to take the form of reverse line movement.
Reverse line movement is when the line moves in contradiction to the public betting percentage. That is, even though most people are betting on one side, the line moves to make that side more attractive. This tends to indicate sharp money.
Lines can also move based on external factors separate from the betting. For example, if three key players from one team are suddenly injured a couple of days out from an important game, that is likely to be reflected in the betting lines. Other factors like this include suspensions, team selection, tactical announcements or weather.
Remember, sportsbooks are not always trying to set lines that they think are fair or even. It’s all about making the most money. A lot of the time, this means balancing the action since they can’t lose when there is even money on each side of the bet.
The bottom line is that with the exception of player and team factors, sportsbooks move betting lines because they think it gives them the best chance of making money.
There are lots of different sports betting strategies that let you leverage your knowledge of line movement.
One of the simplest ways is just knowing when to wait for the line to change in your favor.
Another strategy for using line movement is to observe how the odds change to give you an idea of where the best value is.
First, we’ll think about how the line movement affects our bets when we already know who we want to bet on. If you are sure which side you want to back, all you need to worry about is getting the best price or point spread.
One good rule of thumb is that if you want to bet on the favorite you should bet early.
Line movement can be erratic, but generally, favorites are more popular with the public, and so the line tends to move against them after the betting line is opened.
Remember that a lot of casual bettors don’t even consider odds or the point spread too strongly. They simply bet on the favorite as soon as the line is released. Over time, the line tends to move against the favorite, making them a less attractive bet.
Conversely, if you like the road underdog it is often worth waiting a few days after the line is released. Generally, the public bets on favorites which leads to line movement in favor of the underdog. This is known as betting against the favorite, and you can read our guide here.
Line movement is also very important for hedging. If you get in early and the line moves so that your side of the bet comes down in odds or points, chances are you can bet on the other side to reduce your risk. This is only possible when the line moves in your favor.
One more technique to use if you know which side you like: decide on a price that works for you and wait to see if the line moves onto your price. If it doesn’t, don’t bet.
What about when you don’t know which side of the bet you want to bet on? Well, line movement can help you pick. Take this example:
This line movement indicates that a lot of money has been placed on the Celtics in a short space of time. Although movement does tend to go against the favorite, it is often quite gradual.
A big jump like this suggests that the smartest bettors with the most money (or sharps) think that the original line offered by the sportsbook was very good value.
If you spot a situation like this, a good move will be to quickly check other sportsbooks to see if the Celtics are available anywhere else at -6. Since sportsbooks react to the bets they receive themselves (as opposed to bets received by other sportsbooks) lines move at different speeds in different books.
Once you have an idea of the value from the line movement of one book, you should shop around with others to find the best price.
As you gain more experience in sports betting, you will become more familiar with the way the lines move. Generally speaking, if you notice a line moving in a way that “feels” irregular, it suggests that you can find value – either by getting in on the action before the line changes or by shopping around for a better price using your information.
Both the direction of the line movement and the timing of the line movement gives us information. Dramatic movement over a short period of time indicates big money from clued-in bettors. Gradual movement in one direction indicates public perception.
So, we know that sometimes line movement is orchestrated by sportsbooks to entice people to bet on a specific side of the bet, generally to balance the house’s action.
Depending on the kind of bet, line movement will look different. In this section we’ll walk you through some of the most common forms of line movement you’ll see in sports betting.
Point spread betting is one way that sportsbooks can lev
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What Happens Betting Spread If Level

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