Spread Betting

Published: 06/09/2010

If wagering were limited to “straight up” bets, simply picking a side to win or lose, the public would soon lose interest and bookmakers couldn’t make a living. Fortunately, there other types of wagers that go far beyond predicting the winner of a given event and one of them gaining in popularity is called “spread betting.”

In its simplest form, spread betting is a way of giving a handicap to the underdog in a contest so that the competitors become more evenly matched. For example, if Manchester United are heavily favoured at home to beat a weak West Ham club, nobody will bet on the Hammers, so the odds makers offer a special inducement called the “Point Line,” such as “Man Utd -2.” That means the spread of two points will be subtracted from the Red Devils’ total score at the end of the match. On the other side, the Point Line for West Ham would read +2, meaning they receive a handicap of two goals.

To avoid the possibility of draws, bookmakers often use half-point spreads, such as “Chelsea -0.5.” If the Blues win outright, they would still win the bet, but if the match goes nil-nil, their opponent would “cover” the spread and win. Powerhouse teams may do very well straight up, but their records “against the spread” (ATS) are much more important to bettors. When the spreads are big, betting on weaker clubs by “taking points” suddenly appears quite attractive as opposed to backing the favourite and “giving points.”

The way sportsbooks make money on spread betting is by taking from the winners a small commission known as the “margin,” “vigorish,” or “juice.” It is typically on the order of five percent. Thus, a winning £10 wager on “Chelsea -0.5” will pay a profit of £9.50 instead of even money. As long as the sportsbook can “balance the action” by having roughly the same number of bettors on each side of the spread, it makes money.

This leads to some very interesting opportunities in spread betting. Should the public wager heavily on Chelsea at -0.5, the bookmaker has the option of making adjustments by issuing new odds at -1.5. This has no effect on wagers already placed. For them, the Point Line remains the same. But it should attract more wagers on the opponent and inhibit betting on Chelsea.

In fact, when the Point Line shifts, opportunities are created to “hedge” bets, rather like taking out insurance, or to win both ways. Anyone with £10 on Chelsea -0.5 expects to win by a goal or more. If the opportunity arises to bet on the opponent at +1.5, making a £10 wager on the other side will pay double if the Red Devils win by exactly a goal and only lose 50p otherwise.

The obvious advantages of spread betting are minimized risk and the possibility of winning by backing a loser. It is already the most popular form of wagering in the United States, and it is credited with pushing the number of gamblers in the U.K. toward the one million mark. However, there is a variation of spread betting that adds even more risk and reward to wagering, and it is offered through betting exchanges.

A betting exchange is unlike a sportsbook in that it does not put up its own money on either side of a wager. Instead, it pairs up bettors and allows them to wager against each other. It also allows the bettors to determine the spread all by themselves by “backing” the favourite or “laying odds” on the underdog.

For example, the betting exchange would match up someone offering to back Chelsea with a spread of -1.5 with another person laying odds on their opponent at +1.5. Another bettor might offer Chelsea -0.5 and find no takers, in which case the bet is off when the match begins. What adds excitement to this type of spread betting is that bettors can take advantage of the zeal of fans and any unwarranted confidence in the market by offering spreads much greater than the traditional market.

In the United States, a variation on spread betting called the “teaser” also allows bettors to set their own Point Lines. For a surcharge, agreeing to accept a potential payout of less than even money, the bettor can buy points and turn Chelsea -0.5 into Chelsea +0.5 or even +1.5, locking in a win on all but a big upset.

Published on: 06/09/2010

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