Spread betting

Spread betting

Spread Betting is a form of gambling on the outcome of any event where the more accurate the gamble the more is won and conversely the less accurate then more is lost. A bet is made against a 'spread' (or index), on whether the outcome will be above or below the spread. The amount won or lost depends on the level of the index at the end of the event. The spread represents the index firms margin.

The concept has a long history in American sports betting and was imported to the United Kingdom in the 1980s. In North America the bettor usually bets that the difference in the scores of two teams will be less than or greater than a value specified by the bookmaker. For example, if a bettor places a bet on an underdog in an American football game when the spread is 3.5 points, he is said to take the points; he will win his bet if the underdog's score plus 3.5 points is greater than the favourite's score. If he had taken the favourite, he would have been giving the points and would win if the favourite's score less 3.5 points was greater than the underdog's score.

Spreads are often specified in fractions of points to avoid ties, or pushes. The winner of a North American spread bet is paid off at even money less the bookmaker's commission, commonly known as \vigorish or vig. If the bet is a push the bettors receive their stake back less the vig.

In the United Kingdom spread betting has come to resemble the futures market. The bets are usually on the outcome of sporting events or indeed on financial instruments, but the firms often offer bets on more arbitrary events - such as the number of corners during a football match or the total shirt numbers of the goal scorers.

Unlike fixed odds betting the amount won or lost can be very large, as there is no single stake to limit the maximum losses. However, it is usually possible to place a "stop loss" with the bookmaker, automatically closing your bet if the value of the spread moves against you by a specified amount. "Stop wins" are the opposite -- closing your bet when the spread moves in your favour by a specified amount.

Example: In a football match between Liverpool and Everton the spread for corners is 12-13, the index firm believes there will be 12 or 13 corners in total during the match. A bettor approaches the firm with the belief that there will be more than 13 corners during the game, the bettor 'buys' at �25 a point at 13. If the final total of corners is 16 the bettor has won, receiving 3 x �25. If the final total of corners is 10, the bettor loses 3 x �25. A 'sell' transaction is similar except made against the bottom value of the spread. Often there is live pricing, which changes the spread during the course of an event allowing a profit to be increased or a loss minimized.

In North American sports betting many of these wagers would be classified as over-under bets rather than spread bets.