Understanding Betting Spreads

Basically speaking, a point spread is a number the oddsmaker sets as the median between the two sides playing in the game in question for the purpose of creating betting excitement for both sides. Basically speaking, a point spread is a number the oddsmaker sets as the median between the two sides playing in the game in question for the purpose of creating betting excitement for. It’s time to get betting lines explained. What does the betting line mean – betting lines explained. Betting lines or point spread betting is a type of betting that was created to make the contest more even. You can compare line betting to a handicap applied to a team you bet on. Basically, the line determines certain limitations for betting. Yes, ties can happen when point spread betting. If the point spread is an even number and the difference in the competition’s result falls directly on that number such that the teams are then evenly scored, it is a tie. In point spread betting, a tie is called a “push.” In the case of a push, all bets are returned to the bettor.

Spread Betting Football
Understanding Betting Odds Sports
Understanding Sports Betting Spreads

For the novice sports bettor, understanding how sports betting odds work can be one of the most confusing sets of numbers you've ever dealt with. For those who have just started betting on sports, to know how the odds work is of key importance for a profitable and enjoyable betting experience. We are here to give you an overview of the basic styles of betting odds, how you can read the different formats, and how to use them to your favor.

While you may still be confused at the end, the only way you are going to learn how to play with odds is by adapting the appropriate information and utilizing it firsthand. To this degree, we have found various sports betting sites where you can utilize these options to the fullest extent. And, if you ever have any questions, please drop us a line at webmaster@explainbettingodds.com where we can answer all of your questions through email.

Different Types Of Betting Odds Explained

Quick Explanation Of How To Read Sports Betting Odds

Point Spread - If A Football Team Is -7, Then That Team Must Win By 8 Points To Win The Bet.
Over / Under ' AKA The Total' - If An Over / Under Is 42 In A Football Game, The Combined Total Amount Of Points Both Teams Must Score Needs To Be Over 43 Points To Win The Wager.
Moneyline Betting Odds - If The Money Line Has “Team A” at -150 Betting Odds Against The Colts, I Must Bet $150 To Win $100 And If Team A Wins, Then I Would Win My Bet.There are three forms of regular betting odds that you will see at every sportsbook that you visit, whether online or in person. These are the ones that you see right off the bat and the ones that really matter when you are betting on sports. If nothing else, you have probably heard them talked about by either your friends or TV broadcast on ESPN or other channels.

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How To Read And Understand MoneyLine Betting Odds

First there are the moneyline betting odds , which is the bet on who will win the event outright with no point spreads or other variables. You simply pick the team you think will win and place the bet. However, without using the odds, the payouts are usually much different then they would be with the odds in place.

When betting on the moneyline, the favorite will always have a negative symbol in front of the number and the underdog will always have a plus sign in front of it (an example is -150 favorite or +150 for the underdog).

How To Read The Point Spreads

Next, we come to what may be the most common type of sports betting odds, which is the point spread. They put point spreads up for all of the main sports such as football, basketball, hockey, baseball, and others. This is called 'The Spread' and it basically tells you which team is favored and by how much. When betting the spread, you are betting that a team will win by a certain number of points, runs, or whatever. Here is an example to help you understand point spreads in football.

If you are Betting The Point Spread On 'Team A' in Football - Favored by -6 - This means 'Team A' must beat the other team by 7 points or more to win the bet.

If You Are Betting The Point Spread On 'Team B' in Football Game - Underdog that is getting +6 points - This means as long as 'Team B' does not lose by 7 or more points, then you will win the bet. If Team A wins, but only by 3 points, then you will still win and get paid.

How To Read The Over / Under Betting Odds

There is also the total score or the over/under, and this line lets you bet on whether or not the total score between all competitors will go above or below a predetermined amount. You simply look at what the Over / Under is and then bet on which you think it will be. There are over and under betting odds for pretty much every sport including baseball, football, hockey, UFC, Basketball, Horse racing, and much more.

The over/under betting odds, or the totals, work differently for each sport. If the number is 42 in a football game and you bet the over, you would need 43 points total between the two teams. In baseball betting, it is the number of runs scored that sets the total. The UFC over/under betting odds are which round the fight will end. Hockey totals are how many goals will be scored between both teams.

With the spread and the total, you will occasionally see that the odds are distributed with 'half points,' which are in place to prevent a 'push,' or no one winning or losing the bets. As long as there is a winner or loser, the sportsbooks will make their money on the juice and be happy.

What To Know About Vegas Betting Odds

The truth of the matter is that Vegas pretty much sets all of the sports betting odds for the entire world. All of the world’s leading experts work for the big casino companies in Las Vegas, and all of them work together to set the odds for different sports. Anytime you hear someone asking or talking about Vegas odds, they are simply talking about the odds and nothing specifically related to Vegas. All of the online sportsbooks use services that simply use the Vegas odds as a starting point for events. Then their own systems will adjust the spread depending on how people are betting at their sportsbook. Ultimately a sportsbook wants 50% of the bets on each side of a game so that they can simply make money on the juice.

Exotic Betting Odds Explained

Exotic bets are there to make for a more entertaining betting experience, but they work somewhat differently compared to the straight bets. But, the original point spread is still used in all these bets no matter how you look at it.

Parlays are essentially a combination of two or more bets into one, such as three teams winning their respective matches. These parlays are usually a long shot since so many teams have to win, but in the end, they are also some of the highest paying games. You can pick teams to cover the point spread, over or unders, or moneylines in a parlay and sometimes you can mix in different sports.

Pleasers are some of the highest paying bets, as they take the spread and then subtract points, making it harder to succeed. Then you also have to combine them into another bet of the same type in order to win. The payouts are huge, but it is not likely that these will come in unless you have the utmost luck or some sort of inside knowledge.

Teaser bets bets are the exact opposite, in that you can adjust the spread to be more favorable, thus lowering your payout but increasing your chances of winning. Either way, these are some of the more exciting ways for you to wager.

There are also 'If-Bets', which allow you to combine two bets. The first bet has to win for the second bet to have action. If the first bet fails, the second bet doesn't come through. If you win the first bet, you can then use the winnings on the second bet, essentially building your bankroll.

Different Formats Of Betting Odds

How To Read American Betting Odds

American odds have become incredibly commonplace, despite the fact that they are not as easy to read as other formats. As an example, American Odds read like this:

Odds To Win Super Bowl:

Team A: -150
Team B: +200
Team C: +600
Team D: +1000

With American odds, the number represented is how much you have to bet to win $100. If the number is preceded with a '+' sign, then you would risk less than $100 to win a wager worth $100. And, the opposite is true when the number is preceded with a '-' where the bettor would have to risk more than $100 just to win $100 of the wager.

In the example above, you can see that Team A has the lowest number of the group and are considered to be the favorite to win this bet. If you wagered on Team A to win the Super Bowl and they end up winning, you are going to need to risk more than $100 to win $100 as indicated by the '-' symbol preceding the payouts. In this particular example, a bettor would need to wager $150 to win $100.

On the opposite side of that, the other 3 teams in contention all pay better than 1 to 1 odds (risk less than $100 to win $100). Team B is at +200: risk $50 to win $100. Team C is at +600: risk $16.67 to win $100. Team D is at +1000: risk $10 to win $100.

These can be a little bit confusing but if you just pay attention to the + or - symbol then you should not have any issues. And, with a little bit of manipulation, you can see how these odds will pay if the wager ends up being a winner and that is what we're all here for... to win.

How To Read Fractional Odds

Fractional betting odds are the easiest to understand. Just about every single sportsbook that caters to Americans has the option available for fractional odds. And, while they may seem daunting at first, you don't really need to understand complex fractions in order to utilize these odds. Let's look at an example:

Odds To Win Fight:

Fighter A: 4/7
Fighter B: 3/2

In order to best understand these lines, you first need to look at the ratio to 1. In the example above, 4/7 odds is less than 1 and the opposite can be said for the other side as 3/2 is more than 1. Once you have determined this, you can figure out the favorite.

To figure out which side is favored, you simply need to figure out which is the lower number. In this case, Fighter A is at 4/7 odds which is less than 1 and Fighter B is at 3/2 odds which is more than 1. Fighter A's wager is the clear favorite as it is the lower number.

So, how do you figure out what these pay? Again, we refer back to 4/7 being less than 1, and 3/2 being more than 1.

Anytime fractional odds are displayed at a value of less than 1, the bettor must risk more than they intend to win if the wager is a winner. And, the opposite can be said for if a fractional value is more than 1... that bet will pay more than what is risked.

As we said before, 4/7 odds are less than 1 so in this case, the bettor must risk $7 to win $4 from the wager. Then, 3/2 are more than 1 so when risking $2, the bettor will win $3 off the wager. As you can see, the payouts are in the fractional odds, you just need to know which way they go based on if they represent a value greater than or less than one.

Understanding Betting Odds That Use Decimals

Decimal odds are slightly more confusing than most other types of odds. In fact, we prefer not to use them when we bet but that is just our preference. Regardless, we are going to give you a little insight into these lines, as we want to give you insight about all of the common types of odds available.

If you look into these odds, you will definitely come out a little bit confused unless you are from Europe where these odds are commonly used than American or Fractional odds. The multiplication game is not as straight forward with decimal odds. Let's take a look at another example:

Odds To Be Next President:

Candidate A: 1.50
Candidate B: 2.45

When looking at decimal based odds, the same thing applies to them as all the other forms of odds when trying to determine the favorite... whichever is the lowest number is favored. In the example above, the favored candidate is Candidate A at 1.50 however Candidate B is only a little bit behind at 2.45

Figuring out the payouts is where decimal odds can get tricky, but you'll soon learn a little trick that will make these very easy to understand.

The best way to start off look at these odds is to consider them to be monetary amounts based on what you will win if you wager $1 or one euro, one pound, etc... which includes the original wager. Be sure to keep that in mind when looking at the other odds types.

If Candidate A wins the election, every $1 wagered will win $.50 plus the original $1 wagered which equals $1.50 or 1.50 odds.

Candidate B: every $1 wagered earns $1.45 which equals $2.45 or 2.45 odds.

Now That You Know How To Read Sports Betting Odds

Now that you understand how to read odds, you will then want to see how they are adapted to the different betting lines. With the straight wagers and exotic wagers alike, you will find that these odds are worked into the lines. After you figure out how to read the odds, you will then have to figure out the different types of bets that you can find through most sports betting sites. The different types of bets use odds somewhat differently, but in the end, it is all fairly similar.

We have created special pages that explain how to read the betting odds on a variety of sports. The reason for this is that some sports have betting odds available that others do not. Some sports betting odds can be broken down into a half or quarters while others are just for the entire duration of a match or game. For instance, you cannot really compare the NASCAR or PGA odds with NFL, and vice versa. Each page is crafted specifically for an individual sport making it easier for bettors to learn the ins and outs of betting on whichever sport they choose.

Online Sportsbooks With The Best Sports Betting Odds Available

Now we come to the online sportsbooks + sports betting sites that actually offer the odds we are explaining. There are plenty of betting sites out there, but we have decided to list only those we felt were of the highest level of quality. When personally and individually tested these sportsbooks in order to figure out exactly what they have to offer. In the end, we decided to play with those offering the highest paying odds, the most diverse set of betting types, and a fairly wide range of different sports. Throw in the big bonuses and easy financial transfers and what you get is one of the best sets of betting sites on the Internet.

Bovada Sportsbook - More Betting Odds Than Other Sports Betting Sites

Its already know that Bovada is one of the better online sportsbooks for players to sign up for. The fact that there are so many betting options on this sportsbook makes it known to be a better site as well. Most of the time players look for sites that have the total package which is what Bovada has. Players will flock towards Bovada and one main reason for that is because of the betting odds that are offered to players.

The odds offered on Bovada are her for a player to place big-time bets and make a lot of cash. This makes it very easy for players to pick which bets they want to place. Because of these great betting odds offered, it is known that players are cashing big on parlay bets. More players have a lot got involved in live betting as well because these odds that are here on Bovada are better than other sites they have visited. Because of these betting odds offered, the attention Bovada will get will only increase!

BetOnline Sportsbook - New Bettors Get Bonuses On Every Deposit You Make For Life

There is no doubt that BetOnline has a lot of players that have accounts with them. There are many reasons for that and this list of players will continue to grow and will for the right reason. Even though the age requirement of 18 and older to sign up is one thing that players notice when it comes to BetOnline, the betting odds are something that also grabs a lot of attention as well. These betting odds that are here on the prop bets and are much better than most other online sportsbooks.

Knowing how betting odds work is important and that also will make it easier to understand why BetOnline has the best betting odds for all players. These close odds are what players like and most of the time this will decide what bets they place. With a team being slight underdogs with those odds definitely makes players think if they want to place a bet on those teams and these upsets can end up earning players a lot of extra money! BetOnline odds are very good and makes players consider both sides.

MyBookie Sportsbook - Betting Odds The Best Here On MyBookie

Mybookie is clearly known to be one of the better sites for many players. The number one thing that players check out when they sign up for online sportsbooks is what kind of bets that it offers and there is no doubt that MyBookie has any bet that players can think of. With so many different betting options comes the betting odds as well. The odds here for are taylor made for players. This means that these odds are very good for players because they are close and have players considering to take the upset over the favorite sometimes.

Taking the upset sometimes over the favorite can be the way that players can capitalize big. Something as simple as picking the Miami Heat over the Los Angeles Lakers in the NBA could be considered because of the close the betting odds could be on MyBookie. The great thing about sports is nothing is guaranteed and upsets are often happening so taking an upset sometimes could be very beneficial on MyBookie. This also goes picking the favorite as well. Slight favored could mean to put a lot more money down and lead players to win more. MyBookie is known for great betting odds.

Spread betting is any of various types of wagering on the outcome of an event where the pay-off is based on the accuracy of the wager, rather than a simple 'win or lose' outcome, such as fixed-odds (or money-line) betting or parimutuel betting.

A spread is a range of outcomes and the bet is whether the outcome will be above or below the spread. Spread betting has been a major growth market in the UK in recent years, with the number of gamblers heading towards one million.^[1] Financial spread betting (see below) can carry a high level of risk if there is no 'stop'.^[2] In the UK, spread betting is regulated by the Financial Conduct Authority rather than the Gambling Commission.^[3]

Purpose[edit]

The general purpose of spread betting is to create an active market for both sides of a binary wager, even if the outcome of an event may appear prima facie to be biased towards one side or the other. In a sporting event a strong team may be matched up against a historically weaker team; almost every game has a favorite and an underdog. If the wager is simply 'Will the favorite win?', more bets are likely to be made for the favorite, possibly to such an extent that there would be very few betters willing to take the underdog.

The point spread is essentially a handicap towards the underdog. The wager becomes 'Will the favorite win by more than the point spread?' The point spread can be moved to any level to create an equal number of participants on each side of the wager. This allows a bookmaker to act as a market maker by accepting wagers on both sides of the spread. The bookmaker charges a commission, or vigorish, and acts as the counterparty for each participant. As long as the total amount wagered on each side is roughly equal, the bookmaker is unconcerned with the actual outcome; profits instead come from the commissions.

Because the spread is intended to create an equal number of wagers on either side, the implied probability is 50% for both sides of the wager. To profit, the bookmaker must pay one side (or both sides) less than this notional amount. In practice, spreads may be perceived as slightly favoring one side, and bookmakers often revise their odds to manage their event risk.

One important assumption is that to be credited with a win, either team only needs to win by the minimum of the rules of the game, without regard to the margin of victory. This implies that teams in a winning position will not necessarily try to extend their margin—and more importantly, each team is only playing to win rather than to beat the point spread. This assumption does not necessarily hold in all situations. For example, at the end of a season, the total points scored by a team can affect future events such as playoff seeding and positioning for the amateur draft, and teams may 'run up' the score in such situations. In virtually all sports, players and other on-field contributors are forbidden from being involved in sports betting and thus have no incentive to consider the point spread during play; any attempt to manipulate the outcome of a game for gambling purposes would be considered match fixing, and the penalty is typically a lifetime banishment from the sport; such is the lack of tolerance for manipulating the result of a sporting event for such purposes.

Spreads in sports wagering (U.S.)[edit]

Spread betting was invented by Charles K. McNeil, a mathematics teacher from Connecticut who became a bookmaker in Chicago in the 1940s.^[4] In North America, the gambler usually wagers that the difference between the scores of two teams will be less than or greater than the value specified by the bookmaker, with even money for either option. An example:

The bookmaker advertises a spread of 4 points in a certain game;
- If the gambler bets on the 'underdog', they are said to take the points and will win if the underdog's score plus the spread is greater than the favorite's score.
  - The eventual score is Underdog 8, Favorite 10: 8 + 4 > 10, so the gambler wins;
  - The eventual score is Underdog 8, Favorite 13: 8 + 4 < 13, so the gambler loses.
- If the gambler bets on the 'favorite', they give the points (sometimes called lay the points) and will win if the favorite's score minus the spread is greater than the underdog's score:
  - The eventual score is Underdog 5, Favorite 10: 10 – 4 > 5, so the gambler wins;
  - The eventual score is Underdog 8, Favorite 10: 10 – 4 < 8, so the gambler loses.
- Ties aka 'Push'
  - The eventual score is Underdog 9, Favorite 13: 9 + 4 = 13, so the gambler ties 'pushes'. The reverse is also the same the gambler takes the favorite and it is 13 - 4 = 9

Spreads are frequently, though not always, specified in half-point fractions to eliminate the possibility of a tie, known as a push. In the event of a push, the game is considered no action, and no money is won or lost. However, this is not a desirable outcome for the sports book, as they are forced to refund every bet, and although both the book and its bettors will be even, if the cost of overhead is taken into account, the book has actually lost money by taking bets on the event. Sports books are generally permitted to state 'ties win' or 'ties lose' to avoid the necessity of refunding every bet.

Betting on sporting events has long been the most popular form of spread betting. Whilst most bets the casino offers to players have a built in house edge, betting on the spread offers an opportunity for the astute gambler. When a casino accepts a spread bet, it gives the player the odds of 10 to 11, or -110. That means that for every 11 dollars the player wagers, the player will win 10, slightly lower than an even money bet. If team A is playing team B, the casino is not concerned with who wins the game; they are only concerned with taking an equal amount of money of both sides. For example, if one player takes team A and the other takes team B and each wager $110 to win $100, it doesn't matter what team wins; the casino makes money. They take $100 of the $110 from the losing bet and pay the winner, keeping the extra $10 for themselves. This is the house edge. The goal of the casino is to set a line that encourages an equal amount of action on both sides, thereby guaranteeing a profit. This also explains how money can be made by the astute gambler. If casinos set lines to encourage an equal amount of money on both sides, it sets them based on the public perception of the team, not necessarily the real strength of the teams. Many things can affect public perception, which moves the line away from what the real line should be. This gap between the Vegas line, the real line, and differences between other sports books betting lines and spreads is where value can be found.

A teaser is a bet that alters the spread in the gambler's favor by a predetermined margin – in American football the teaser margin is often six points. For example, if the line is 3.5 points and bettors want to place a teaser bet on the underdog, they take 9.5 points instead; a teaser bet on the favorite would mean that the gambler takes 2.5 points instead of having to give the 3.5. In return for the additional points, the payout if the gambler wins is less than even money, or the gambler must wager on more than one event and both events must win. In this way it is very similar to a parlay. At some establishments, the 'reverse teaser' also exists, which alters the spread against the gambler, who gets paid at more than evens if the bet wins.

Sports spread betting[edit]

In the United Kingdom, sports spread betting became popular in the late 1980s by offering an alternative form of sports wagering to traditional fixed odds, or fixed-risk, betting. With fixed odds betting, a gambler places a fixed-risk stake on stated fractional or decimal odds on the outcome of a sporting event that would give a known return for that outcome occurring or a known loss if that outcome doesn't occur (the initial stake). With sports spread betting, gamblers are instead betting on whether a specified outcome in a sports event will end up being above or below a ‘spread’ offered by a sports spread betting firm, with profits or losses determined by how much above or below the spread the final outcome finishes at.

The spread on offer will refer to the betting firm's prediction on the range of a final outcome for a particular occurrence in a sports event, e.g., the total number of goals to be scored in a football (US: soccer) match, the number of runs to be scored by a team in a cricket match or the number of lengths between the winner and second-placed finisher in a horse race.

The gambler can elect to ‘buy’ or ‘sell’ on the spread depending on whether they think the final outcome will be higher than the top end of the spread on offer, or lower than the bottom end of the spread. The more right the gambler is then the more they will win, but the more wrong they are then the more they can lose.

The level of the gambler's profit or loss will be determined by the stake size selected for the bet, multiplied by the number of unit points above or below the gambler's bet level. This reflects the fundamental difference between sports spread betting and fixed odds sports betting in that both the level of winnings and level of losses are not fixed and can end up being many multiples of the original stake size selected.

For example, in a cricket match a sports spread betting firm may list the spread of a team's predicted runs at 340 – 350. The gambler can elect to ‘buy’ at 350 if they think the team will score more than 350 runs in total, or sell at 340 if they think the team will score less than 340. If the gambler elects to buy at 350 and the team scores 400 runs in total, the gambler will have won 50 unit points multiplied by their initial stake. But if the team only scores 300 runs then the gambler will have lost 50 unit points multiplied by their initial stake.

It is important to note the difference between spreads in sports wagering in the U.S. and sports spread betting in the UK. In the U.S. betting on the spread is effectively still a fixed risk bet on a line offered by the bookmaker with a known return if the gambler correctly bets with either the underdog or the favourite on the line offered and a known loss if the gambler incorrectly bets on the line. In the UK betting above or below the spread does not have a known final profit or loss, with these figures determined by the number of unit points the level of the final outcome ends up being either above or below the spread, multiplied by the stake chosen by the gambler.

For UK spread betting firms, any final outcome that finishes in the middle of the spread will result in profits from both sides of the book as both buyers and sellers will have ended up making unit point losses. So in the example above, if the cricket team ended up scoring 345 runs both buyers at 350 and sellers at 340 would have ended up with losses of five unit points multiplied by their stake.

Bets on the total (over/under)[edit]

In addition to the spread bet, a very common 'side bet' on an event is the total (commonly called the over/under or O/U) bet. This is a bet on the total number of points scored by both teams. Suppose team A is playing team B and the total is set at 44.5 points. If the final score is team A 24, team B 17, the total is 41 and bettors who took the under will win. If the final score is team A 30, team B 31, the total is 61 and bettors who took the over will win. The total is popular because it allows gamblers to bet on their overall perception of the game (e.g., a high-scoring offensive show or a defensive battle) without needing to pick the actual winner.

In the UK, these bets are sometimes called spread bets, but rather than a simple win/loss, the bet pays more or less depending on how far from the spread the final result is.

Example: In a football match the bookmaker believes that 12 or 13 corners will occur, thus the spread is set at 12–13.

A gambler believes that there will be more than 13 corners, and 'buys' at £25 a point at 13.
- If the number of corners is 16, the gambler wins (16–13) = 3 x £25.
- If the number of corners is 10, the gambler loses (13–10) = 3 x £25.
A 'sell' transaction is similar except that it is made against the bottom value of the spread.
Often 'live pricing' changes the spread during the course of an event, increasing a profit or minimizing a loss.

In North American sports betting many of these wagers would be classified as over-under (or, more commonly today, total) bets rather than spread bets. However, these are for one side or another of a total only, and do not increase the amount won or lost as the actual moves away from the bookmaker's prediction. Instead, over-under or total bets are handled much like point-spread bets on a team, with the usual 10/11 (4.55%) commission applied. Many Nevada sports books allow these bets in parlays, just like team point spread bets. This makes it possible to bet, for instance, team A and the over, and be paid if both

team A 'covers' the point spread (wins by that amount or more)

and

the total score is higher than the book's prediction.

(Such parlays usually pay off at odds of 13:5 with no commission charge, just as a standard two-team parlay would.)

Mathematics[edit]

The mathematical analysis of spreads and spread betting is a large and growing subject. For example, sports that have simple 1-point scoring systems (e.g.,baseball, hockey, and soccer) may be analysed using Poisson and Skellam statistics.

Financial spread betting[edit]

By far the largest part of the official market in the UK concerns financial instruments; the leading spread-betting companies make most of their revenues from financial markets, their sports operations being much less significant. Financial spread betting in the United Kingdom closely resembles the futures and options markets, the major differences being

Spread Betting Football

the 'charge' occurs through a wider bid-offer spread;
spread betting has a different tax regime compared with securities and futures exchanges (see below);
spread betting is more flexible since it is not limited to exchange hours or definitions, can create new instruments relatively easily (e.g. individual stock futures), and may have guaranteed stop losses (see below); and
the trading is off-exchange, with the contract existing directly between the market-making company and the client, rather than exchange-cleared, and is thus subject to a lower level of regulation.

Financial spread betting is a way to speculate on financial markets in the same way as trading a number of derivatives. In particular, the financial derivative Contract for difference (CFD) mirrors the spread bet in many ways. In fact, a number of financial derivative trading companies offer both financial spread bets and CFDs in parallel using the same trading platform.

Unlike fixed-odds betting, the amount won or lost can be unlimited as there is no single stake to limit any loss. However, it is usually possible to negotiate limits with the bookmaker:

A stop loss or stop automatically closes the bet if the spread moves against the gambler by a specified amount.
A stop win, limit or take profit closes the bet when the spread moves in a gambler's favor by a specified amount.

Spread betting has moved outside the ambit of sport and financial markets (that is, those dealing solely with share, bonds and derivatives), to cover a wide range of markets, such as house prices.^[5] By paying attention to the external factors, such as weather and time of day, those who are betting using a point spread can be better prepared when it comes to obtaining a favorable outcome. Additionally, by avoiding the favourite-longshot bias, where the expected returns on bets placed at shorter odds exceed that of bets placed at the longer odds, and not betting with one's favorite team, but rather with the team that has been shown to be better when playing in a specific weather condition and time of day, the possibility of arriving at a positive outcome is increased.

Tax treatment[edit]

In the UK and some other European countries the profit from spread betting is free from tax. The tax authorities of these countries designate financial spread betting as gambling and not investing, meaning it is free from capital gains tax and stamp duty, despite the fact that it is regulated as a financial product by the Financial Conduct Authority in the UK. Most traders are also not liable for income tax unless they rely solely on their profits from financial spread betting to support themselves. The popularity of financial spread betting in the UK and some other European countries, compared to trading other speculative financial instruments such as CFDs and futures is partly due to this tax advantage. However, this also means any losses cannot be offset against future earnings for tax calculations.

Conversely, in most other countries financial spread betting income is considered taxable. For example, the Australian Tax Office issued a decision in March 2010 saying 'Yes, the gains from financial spread betting are assessable income under section 6-5 or section 15-15 of the ITAA 1997'.^[6] Similarly, any losses on the spread betting contracts are deductible. This has resulted in a much lower interest in financial spread betting in those countries.

Financial spread bet example[edit]

Suppose Lloyds Bank is trading on the market at 410p bid, and 411p offer. A spread-betting company is also offering 410-411p. We use cash bets with no definite expiry, or 'rolling daily bets' as they are referred to by the spread betting companies.

If I think the share price is going to go up, I might bet £10 a point (i.e., £10 per penny the shares moves) at 411p. We use the offer price since I am 'buying' the share (betting on its increase). Note that my total loss (if Lloyds Bank went to 0p) could be up to £4110, so this is as risky as buying 1000 of the shares normally.

If a bet goes overnight, the bettor is charged a financing cost (or receives it, if the bettor is shorting the stock). This might be set at LIBOR + a certain percentage, usually around 2-3%.

Thus, in the example, if Lloyds Bank are trading at 411p, then for every day I keep the bet open I am charged [taking finance cost to be 7%] ((411p x 10) * 7% / 365 ) = £0.78821 (or 78.8p)

On top of this, the bettor needs an amount as collateral in the spread-betting account to cover potential losses. Usually this is either 5 or 10% of the total exposure you are taking on but can go up to 100% on illiquid stocks. In this case £4110 * 0.1 or 0.05 = £411.00 or £205.50

If at the end of the bet Lloyds Bank traded at 400-401p, I need to cover that £4110 – £400*10 (£4000) = £110 difference by putting extra deposit (or collateral) into the account.

The punter usually receives all dividends and other corporate adjustments in the financing charge each night. For example, suppose Lloyds Bank goes ex-dividend with dividend of 23.5p. The bettor receives that amount. The exact amount received varies depending on the rules and policies of the spread betting company, and the taxes that are normally charged in the home tax country of the shares.

Terminology and acronyms[edit]

HoD: High of day (the highest price the market traded at for the day).
Intraday trader: A trader operating from within each day's trade times.
LoD: Low of day (the lowest price the market traded at for the day).
London Turn: The time when markets subtly change direction between 12:15 and 13:15 GMT with a regularity that is more than coincidental.
Market session: The time of day that is governed mostly by the regional stock markets. Times vary from broker to broker, but the following are typical: Asian session (22:30 to 08:45 GMT), European session (06:45 to 16:45 GMT), US session (13:00 to 21:30 GMT).
Spread: The difference between the ask and bid prices, which may vary between markets and between brokers substantially.

Dangers of financial spread betting[edit]

Understanding Betting Odds Sports

According to an article in The Times dated 10 April 2009, approximately 30,000 spread bet accounts were opened in the previous year, and that the largest study of gambling in the UK on behalf of the Gambling Commission found that serious problems developed in almost 15% of spread betters compared to 1% of other gambling.^[7] A report from Cass Business School found that only 1 in 5 gamblers ends up a winner.^[8] As noted in the report, this corresponds to the same ratio of successful gamblers in regular trading.^[9] Evidence from spread betting firms themselves actually put this closer to being 1 in 10 traders as being profitable.^{[citation needed]}

Understanding Sports Betting Spreads

Notes[edit]

^The Sunday Times: 'World Cup to kick off boom in spread betting'
^'The perils of spread-betting'. The Times. Sep 20, 2007. Archived from the original on July 19, 2008.
^'Gambling Commission - Home'. www.gamblingcommission.gov.uk.
^Gambling Times: What are the Odds?Archived 2011-02-04 at the Wayback Machine
^The Sunday Times: Spread betting
^'Income Tax – Assessable income derivation of income – spread betting'. Australian Government ATO. 3 March 2010. Retrieved 26 January 2011.
^Budworth, David. 'Spread-betting fails investors in trouble'. thetimes.co.uk. Retrieved 11 October 2013.
^Pfanner, Eric. 'Spread-bets on Cup venture into bizarre - Technology - International Herald Tribune'. The New York Times. Retrieved 11 October 2013.
^Rayman, Richard. 'White Paper on Spread Betting'(PDF). Cass Business School. Retrieved 11 October 2013.

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