Spread Betting
Interested in spread betting but unsure of what it is and how it works?
SportsBetting.com is here to equip you with the right information and skills so you can increase your chances of winning with spread betting!
What Is a Point Spread Bet?
In sports betting, you can choose from different types of bets: point spread bets, parlay bets, teaser bets, futures bets, and props bets.
Point spread betting is the most known form of sports betting. Thanks to the popularity of basketball and football, various sports bettors often use a point spread.
A point spread is a betting number that oddsmakers, like SportsBetting.com, set as a margin of victory.
For you to win, the team you bet on needs to cover or beat that margin. Point spread betting allows you to bet money on teams or athletes in a sporting event by judging their strengths against each other.
Bookmakers use a point spread as an equalizer for competing teams. So point spread betting helps level the playing field.
Point spread betting is often used in NFL, college football, NBA, and NCAA basketball.
How to Read a Point Spread
In point spread betting, you must take note of the plus or minus sign. The team bearing the plus sign is the underdog, while the one with the negative sign is the favorite.
Let’s say that the New York Giants have a +7.5 spread, while the Dallas Cowboys have a -7.5 spread.
So, the Giants are the underdogs, expected to lose by 7.5 points. As the favorites, the Cowboys are expected to win by 7.5 points.
If you place a bet on the Cowboys and they win by at least 8 points, then you win your bet. If they only get 7 points or less, then you lose the bet.
But if you bet on the Giants and they lose by less than 7.5 points (or win the game), then you win your bet.
When betting online, you’ll often find point spreads with half points, like the -7.5 and +7.5 spreads in the above example. Half points ensure there won’t be a tie.
Point Spread Betting Odds and Movement
The odds on a point spread are commonly known as the vigorish or vig. You may also hear some sports bettors calling this small profit margin juice.
Point spreads are often set with -110 odds. This means that you must bet $110 for a $100 point spread payout.
For example, you place a $110 bet on the Chiefs at -5.5, and they win by 6 points. So, you will get your $110 back plus $100 profit (a total of $210).
Still, pricing often differs or fluctuates. The point spread may change to keep the handicap even. You may see a point spread with odds of -105, -115, or -120, requiring you to bet these amounts to win $100.
Several factors include the side that sports bettors are betting on, the starting lineups, the weather, and injuries.
As sportsbooks release spreads for different points in the match, like after the first quarter or first half, you can bet on point spreads for other parts of the game.
And don’t let the possibility of changing point spreads scare you! SportsBetting.com gives you all the tools that you need to maximize your online sports betting experience. These include sharp odds, various lines, props, and futures, backed by high-level data security and encryption.
In football, the usual margins of victory are 3 and 7. Field goals are worth 3 points, while touchdowns are worth 7 points. So, the point spread numbers may move away from these figures.
While you need a little bit of luck in online gambling, you have higher chances to win money if you check sc hedules, injuries, and box scores daily and find the sportsbook with the best odds.
Betting With or Against the Spread
When you bet with the spread, you’re predicting that the favorite team will win and cover the spread.
If you’re betting against the spread (ATS), you side with the underdog. For you to win, the underdog should win the game outright or lose by less than the given point spread.
The first thing to consider is the team that you think will cover the spread. Do you want to lay the points by betting on the favorite, or do you want to take the points by backing the underdog?
What Are the Outcomes of a Point Spread Bet?
There are three potential outcomes in point spread betting—the favorite covers the spread, the underdog covers the spread, or the bet is voided.
- The favorite covers the spread.
You win if you bet on the favorite and the team successfully covers the spread!
For example, the Bucks are favored by a 4.5 spread over the Lakers. This means that the Bucks are expected to win by at least 4.5 points.
If the Bucks win by 5 or 6 points, then you can start celebrating!
- The underdog covers the spread.
You win your bet if you pick the underdog and the team wins the game outright or loses by a point less than the set point spread.
Let’s take the recent Super Bowl match between the Tampa Bay Buccaneers and Kansas City Chiefs as an example. Since the Chiefs were 3-point favorites over the Buccaneers, they had to win by at least 4 points.
With 31–9 as the final score, the Buccaneers won by a booming 22 points over the Chiefs! In this case, it was the underdog that successfully covered the spread.
- The bet is voided.
The third potential outcome of spread betting is called a push. It happens when the final margin of victory is exactly the same as the point spread.
For example, the New England Patriots have a -7 point spread, expected to win by at least 7 points, while the Buffalo Bills have a +7 spread, expected to lose by at least 7 points.
After the match, New England won by exactly 7 points! Meaning that no team covered the spread.
Point spread tie rules include returning the bets. An online sportsbook transaction record may call this a “canceled” or “voided” bet.
Sportsbooks usually try to use half points so that matches don’t end up in a tie. But there are several lines that land on whole numbers. So if you get a push or a tie, you get your original stake or bet back. No profit, but no loss either!
Puckline and Runline
Point spread betting is most popular in the NFL (National Football League), NBA (National Basketball Association), and NCAA (National Collegiate Athletic Association) games.
Moneylines are the most famous type of bet in MLB (Major League Baseball) and NHL (National Hockey League) games. With moneylines, you bet on which team will win a game.
But some reputable sportsbooks, like SportsBetting.com, make these games more exciting with point spreads! In hockey, the spread is called a puckline, while in baseball, it is called a runline.
In both games, the spread for the favorite is almost always -1.5, and the one for the underdog is +1.5. Setting the spread (puckline or runline) at 1.5 means that both teams are significantly close.
The betting odds fluctuate considerably more than in point spreads for NBA and NFL games as the spread doesn’t usually change.
At SportsBetting.com, we stay transparent with our house rules for every sports bet that we offer. To learn more about these rules, click here!
What Is Spread Betting?
Spread betting is not limited to sports only. It also involves speculating on the price movement of various global financial markets. These include the forex, shares, commodities, and cryptocurrencies.
Instead of taking ownership of the underlying asset, you place a bet on whether the asset’s price rises or falls.
Can you profit from spreading? Yes! If you correctly predict whether the market will rise or fall, you’ll profit. If it’s the opposite, then you lose!
Similarly, in sports betting, you have higher chances to profit if you consistently check schedules and box scores and choose the sportsbook with the best odds.
And the good news is that the profit is often tax-free in spread betting—at least in the UK. In the US, this betting type remains illegal. Traditionally, you need to pay stamp duty and capital gains tax on your profits when buying and selling shares. But spread bets are usually tax-free.
And given that you don’t take ownership of the underlying asset, you don’t need to pay stamp duty either.
Still, tax laws are subject to change and may differ depending on your circumstances .
Origins of Spread Betting
Charles K. McNeil, a mathematics teacher who turned into a securities analyst, was known for inventing the spread betting concept in the 1940s.
But it was only around 30 years later that spread betting became an activity for professional financial industry traders.
In 1974, a City of London investment banker named Stuart Wheeler founded IG Index, a firm that offered spread betting on gold. Because the gold market was prohibitively difficult to participate in, spread betting provided an easier way to speculate on that market.
How Does Spread Betting Work?
In spread betting, you need to track an asset’s value to take a position on the underlying market price without taking ownership.
To see how spread betting works, you need to understand short and long positions, leverage, and margin.
Short and Long
If you go long in spread betting, you bet that the market price will rise over a certain period. Then, you open a position to buy.
If you go short, you place a bet that the market will fall, opening a position to sell.
The loss or gain to your position depends on the extent to which your prediction was correct. Let’s say the market moved down. Then, your spread bet would profit.
But if the market increases, you lose.
Leverage
Leverage allows you to have full market exposure for a portion of the underlying market cost.
Unlike traditional share trading that requires you to pay the full value of your investment, with spread betting, you only need to deposit a fraction of the cost.
But note that leverage is an inherent part of spread betting, so you can’t open a position without one. It’s best to build up your knowledge on the subject and develop a risk management strategy before you start trading using leverage.
With leverage, both profits and losses are magnified as they are calculated based on the full value of the position and not just the initial deposit.
So it’s important to decide how much money you can afford to put at risk. That’s the golden rule in any other popular form of gambling, including sports betting!
Margin
When spread betting, you need to put down a small initial deposit called margin to open a position. There are two types of margins: deposit margins and maintenance margins.
A deposit margin is the initial funding you need to open the position. It’s often presented as a percentage of your total trade.
Maintenance margin refers to the additional funds you may need if your open position starts incurring losses not covered by the initial deposit.
If your position starts making losses, you’ll get a margin call or notification asking you to top up the funds or your position may be closed.
What Are the Main Features of Spread Betting?
In spread betting, you should learn about the spread, the bet size, and the bet duration.
Spread
The difference between the offer and bid, or buy and sell prices, is called the spread.
As the costs of any given trade are factored into these two prices, you’ll always buy relatively higher than the market price. Then, you’ll sell slightly below the price.
Bet Size
The bet size refers to the amount you wish to bet per unit of movement of the market. You can select your bet size as long as it meets the minimum amount accepted for that market.
Your profit or loss depends on the difference between the market’s opening price and closing price, multiplied by your bet’s value.
These price movements of the underlying market are measured in points. Depending on your chosen market’s liquidity, a point of movement can represent a pound, a penny, or a hundredth of a penny.
For instance, if you open a £2 per point bet on the FTSE (Financial Times Stock Exchange) 100 and it moves 60 points in your favor, you gain £120 (£2 x 60).
Bet Duration
The period before your position expires is called the bet duration. Note that all spread bets have a fixed time scale, ranging from one day to several months.
You can close your position anytime before the set expiry date, given that the spread bet is open for trading.
Spread bet durations include daily funded bets and quarterly bets. Daily funded bets keep running as long as you choose to keep them open. These bets are set to expire in the distant future.
You can use these daily funded bets for short-term positions as they are subject to overnight funding.
Quarterly bets are future bets that expire at the end of a quarter. But you can keep them open until the next quarter if you inform the financial spread betting provider in advance.
As these bets have wider spreads but lower funding costs, they’re suited for long-term speculation.
Spread bets are just one of the bet types that you can place in sports betting. Click here to see what other sports betting options await you!
Hedging With Spread Betting
When hedging using a spread bet, you open a position that offsets negative price movement in a current position. It involves trading the same asset in the opposite direction, or on an asset that moves in a different direction to your current trade.
This is common in the financial markets and the same concept can be used in sports betting. Using the financial markets to illustrate this point, let’s say you were worried that inflation can significantly impact the value of your share portfolio. You decide to take a long position on gold, which has an inverse correlation with the dollar and can protect portfolios from inflation.
If your shareholdings decline, then the profits from your spread bet on gold can offset any losses. But if your shareholdings increase in value, the payoff can offset any potential loss to your gold spread bet.
Note that dividend payments do not affect your spread betting position. There will be an adjustment to your position if you hold a spread bet open on equity or index when a dividend payment occurs.
The capital will be credited or debited to your account if a dividend is paid, depending on whether you have incurred additional running losses or profits.
Spread Betting vs. CFDs
Spread betting enables you to bet on the market’s future direction without taking ownership of the underlying assets.
Contracts for difference (CFDs) refer to derivative contracts between financial institutions and investors. The agreement includes exchanging the difference in an asset’s price from when the contract is opened to when it is closed.
While spread betting is free from capital gains tax (CGT), CFD trading requires you to pay CGT.
In the US, profits obtained from sports betting or other forms of gambling are considered taxable income.
Spread Betting Arbitrage
ur profits. Arbitrage opportunities appear when the prices of identical financial instruments differ in various markets or among several companies.
Financial instruments can be bought for a significantly low amount of money. They can also be sold for high prices.
But opportunities for arbitrage in spread betting and other financial instruments have been limited because of increased communication and extensive access to information.
Still, spread betting arbitrage is possible when two companies take separate stances on the market while setting their own spreads.
Let’s say an arbitrageur bets on spreads from two different companies. If the top end of a spread offered by one company is below the bottom end of another’s spread, then the arbitrageur profits from the gap between the two.
In other words, the trader buys low from one company and sells high in another. The rise and fall of the marker do not dictate the amount of return.
Like any other kind of financial trading, financial spread betting may pose some risks. These include market volatility, trading with high amounts of leverage, and the risk that trading costs can erode your profits.
But practicing good risk management can increase your chances of success!
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