An In-Depth Look At Spread Betting

Spread betting is a form of gambling where more or less is won depending on how accurate the gamble. A bet is made against a "spread" (or index), on whether the outcome will be above or below the spread. The spread represents the index firms margin and the level of the index at the end of an event will determine the amount won or lost.

Spread betting has quite a history in North America and was adopted in the United Kingdom in the 1980's. North American spread betting is slightly different than in the United Kingdom. In North America, the bettor usually bets that the difference in the scores of two teams will be greater or less than a value specified by the bookmaker. For example, if a bettor bets on an underdog in an American football game when the spread is 3.5 points, he is said to be taking the points. This bettor will win if the underdog's score plus 3.5 points is greater than the favorite's score. If the bettor had taken the favorite, he is said to be giving the points and would win if the favorite's score minus 3.5 points is greater than the underdog's score.

To avoid ties or pushes, spreads may be specified in half point fractions. In North America, the winner will receive the amount that he has bet and a losing bettor loses the amount wagered plus the bookmaker's commission, commonly known as the vigorish or vig. The vig is usually about 10% of the original wager; in the United Kingdom, both sides are held at 9-10 odds. In North America, betting a push is treated as if no bet at all had been made, while in the United Kingdom they apply "dead heat" rules, resulting in a net loss of 5 pounds on 100 pound wager because of the 9-10 odds of the proposition.

Sometimes the "sports book" or betting establishment calls a game off limits to bettors. This will happen if a key player on a side is injured and the likelihood of him playing is unsure. If this happens, the 'sports book' will not quote a spread at all or they may "circle" the game. If the game is "circled", lower maximum amounts for each bet are enforced (a $5 000 instead of $25 000 limit is typical at most Las Vegas sports books) and certain specialty waivers like "teasers" are banned on both sides of the game. (A teaser is a bet that alters the spread in the bettor's favor by a predetermined margin, most often the spread is altered by 6 points. For example, if the line is 3.5 points and the bettor wants to place a teaser bet on the underdog, he takes 9.5 points instead. The same teaser bet on the favorite means the bettor will take 2.5 points instead of giving 3.5. in return for the extra points, the payout is less than even if the bettor wins. In some places a "reverse teaser" is offered. A reverse teaser alters the spread against the bettor but the payoff is higher than even money if the bettor wins.)

Spread betting looks almost like the futures market in the United Kingdom. The bets are usually on the outcome of sporting events or on financial instruments, but the firm often offers bets on more arbitrary events like the number of corners during a football match or the total shirt numbers of the goal scorers.

Spread betting is unlike fixed odds betting in that the amount won or lost can be very large because there is no single stake to limit the maximum losses. However, it is possible to place a "stop loss" with the bookmaker which will automatically close your bet if the value of the spread moves against you by a specified amount. It is also possible to make a "stop win" and close your bet when the spread moves in your favor by a specified amount.

For example, In a football game between Everton and Liverpool the spread for corners is 11-12 which means the index firm believes there will be 11 or 12 total corner kicks in the game. If a bettor believes there will be more than 12 corners during the game, he will approach the firm and "buy" at 25 pounds a point at 12. If the final total of corners is above 12 than the bettor will receive 25 pounds for each point above 12. The opposite occurs if the total number of corners is less than 12; the bettor will lose 25 pounds a point. A "sell" transaction is similar but is made against the bottom number of the spread. In most events there is live pricing, which changes the spread during an event allowing profit to be increased or a loss minimized.

Many of these wagers would be classified as "under-over" in North America rather than as spread betting. Although, these are for one side or the other of a total and do not increase the amount won or lost as the actual moves away from the bookmaker's prediction. Instead, under-over or total bets are handles much like point spread bets on a team, with the usual 10% commission applied. In Nevada, many sports books allow these bets to be used in parlays, just like team point-spread bets, making it possible to bet, for instance, "the Bears and the over." and be paid if both the Bears "cover" the point spread and the total score is higher than the books prediction. (These parlays usually pay off at odds of 13-5 with no "vig," just as a standard two-team parlay would.

Unfortunately, many spread firms will close your account if you win regularly.

The subject of mathematical analysis of spreads and spread betting is large and growing. Sports with a one point scoring system like soccer, hockey and baseball may be analyzed using Poisson and Skellam.

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