Spread betting takes betting on sports and financial markets to another level. It shifts betting from simple concepts like who would win a football match or who would score the first goal to how many goals, corners or cards a match would have. Would you like to bet on a low number or a high number of them?
Its popularity remains to this day, but it’s a far more complex and riskier alternative to traditional fixed odds betting. So, what is spread betting? Why is it so much riskier? What are its advantages and downsides?
What Does Spread Mean in Betting?
Before we can explain spread betting in more detail, we first need to tackle its two very different meanings.
Point Spread Betting vs Spread Betting
In the US, most wagering on sports is done by either betting on the favourite to overcome a handicap or on the underdog to stay within the handicap, known as point spread betting.
NFL betting sites may decide that the underdogs, the San Francisco 49ers, should have a 4.5-point start over the Green Bay Packers. Punters can then bet at just under even money that the 49ers will win, draw or lose by 4 points or less.
Punters can also bet on the opposite: that the Packers will win by 5 points or more.
The idea with point spread betting is that any match can become a 50/50 game by creating a spread, irrespective of how one-sided it is on paper.
The other type of spread betting, the one we’re looking at here, also starts with a spread being created.
Let’s say that this time, it’s the number of corners in a football match that you’re betting on, and the betting site makes the spread 9-10 corners. Betting there will be less than 9 corners in the game is ‘selling’; betting that there will be more than 10 corners in the game is ‘buying’.
Before placing the bet, you need to decide on your stake per unit. In this case, each unit represents one corner. The more right you are about the number of corners in the game, the more you’ll win, but the more wrong you are, the more you’ll lose.
This form of spread betting on sports was invented in the 1980s in the UK as a riskier alternative to traditional fixed odds betting.
But popular as it is, it pales in comparison to financial spread betting, which involves betting on such things as whether the value of a company or a currency will go up or down.
How Does Spread Betting Work
So that was spread betting explained and how it differs from the UK’s style of spread betting. But how does spread betting work in practice?
Step 1: The Match and the Spread
First, you should decide on the event and the spread betting market you want to play within the event. Let’s say the match is Everton vs Liverpool, and you want to bet on the number of cards that will be shown in the game.
The betting site makes the spread 5.4-5.6 cards.
Step 2: Are You a Buyer or a Seller?
The next step is to decide whether you think there will be more (which would make you a buyer) or fewer (which would make you a seller) corners than the 5.4-5.6 in the spread.
You decide to buy.
If you buy, you’re buying at 5.6; if you’re selling, you’re doing so at 5.4.
Step 3: Your Stake per Unit
The final step is to decide how much you want to buy each card for. You decide to buy cards at £10 a card.
Step 4: Did You Win or Lose?
Six or more cards in the match, and you’ll be in profit; the more after those six, the more you’ll win.
Five cards would mean a small loss because you bought at 5.6, and there were less than that. Four cards or less would mean a bigger loss.
Benefits of Spread Betting
So what are the benefits of betting on sports competitions or financial markets via spread betting?
The More Right You Are, the More You Win
If you placed a bet on over 9.5 corners in a football match at odds of 2.2, then it’s at 2.2 that you’ll be paid out. And it wouldn’t matter if the game had ten corners in it, or 15.
But if you bought corners at 9.4-9.6 in spread betting and there were thirteen, you’d win a lot more than if there were just ten. The more correct you are about what’s going to happen, the more you win.
What You Win Is What You Keep
At betting exchanges you pay a commission on winnings, meaning that the amount you’re set to win when placing a bet is a gross amount, not a net amount. If the bet goes on to win, the exchange will deduct 2 to 5% of your winnings.
With spread betting, the commission is already factored into the spread so there are no further deductions.
Similarly, investors buying and selling shares need to pay Capital Gains Tax of between 10% and 20% on their profits.
However, if you buy or sell a company’s valuation and make money from your financial spread bet, you’re exempt from both Capital Gains Tax and stamp duty.
Adjust Your Position In-Play
The vast majority of spread betting markets are offered in-play. This allows you to adjust your position.
For example, in basketball betting, if you bought total points in the game and it was very high-scoring in the first quarter, you could close out your position, secure a profit and not worry about what happened in the rest of the game.
Risks of Spread Betting
Spread betting is not for the faint-hearted and by its very nature is far riskier than fixed odds betting.
You Don’t Know How Much You Could Lose
With fixed odds betting, you’re only ever going to lose the stake you bet.
With spread betting, you never know how much you could lose at the time you place it, making bank management far more difficult.
The More Wrong You Are, the More You Lose
It’s all well and good to say that the more you’re right, the more you win, but the reverse is also true.
If you sold cricket runs in a Test match and there were many more than the spread, each extra run is going to cost you more, and the losses could be devastating.
Spread Betting is More Likely to Lead to Problem Gambling
A study by the UK Gambling Commission found that almost 15% of spread bettors went on to encounter serious financial or emotional problems as a result of spread betting, a much higher amount than for people engaging in other forms of gambling, which stood at just 1%.
The Difference Between Over/Under and Spread Betting
Chelsea is playing Fulham. A fixed odds bookmaker offers odds of 2.0 on over 2.5 goals and 1.8 on under 2.5 goals. A spread betting firm takes a similar view on the number of goals there might be in the game and makes the spread 2.4-2.6.
If you want a straight bet that either just wins or loses and where you know exactly how much you can win or lose, you’re best off betting with the fixed odds bookie.
But if, for example, you decide that there will definitely be at least three goals in the game, you may prefer to take the riskier and buy goals at 2.6. With this bet, you don’t know how much you could end up winning or losing at the time.
The other difference is that the exact number of goals in the game with the fixed odds bookie doesn’t matter, other than if it’s over, or under, 2.5 goals. With the spread bet the exact number of goals makes a huge difference.
An Example of a Spread Bet
You’re playing the goals market again in a football match, and this time it’s Germany v Portugal, with the spread firm quoting total goals at 2-2.2 and predicting a tight, defensive contest, this time you want to sell goals, so you do so at £50 a goal.
- Match ends 0-0: 2 (spread) – 0 (goals) = 2 x £50 (stake per goal) = £100 profit.
- Match ends 1-0: 2 (spread) – 1 (goal) = 1 x £50 (stake per goal) = £50 profit.
- Match ends 1-1: 2 (spread) – 2 (goals) = 0 x £50 (stake per goal) = Break even.
- Match ends 2-1: 2 (spread) – 3 (goals) = -1 x £50 (stake per goal) = £50 loss.
You’d then also lose an extra £50 for every goal scored after the third.
Why Bettors Like Spread Betting
Imagine this. You’ve bought corners in a football game at 8.6-8.8, and after just 60 minutes, there have already been nine. Every corner after that is profit, and each one is just adding more and more to your win.
That, of course, would be the ideal scenario where you can no longer lose and only stand to win more with each additional corner that comes.
The unlimited potential for profits, not to mention the emotional rollercoaster that some punters enjoy that goes with each goal, card, corner, rugby try, tennis ace or whatever else you’re betting on, are the two main reasons why some people love spread betting.
But you could just as easily find yourself on the other side of such a bet by selling corners where each additional corner just adds to your losses.
Spread betting is far riskier than fixed odds betting and certainly not advisable to punters who are just starting out.
But if you do want to try it, start with ‘paper betting’ where you place imaginary bets and then work out how they ‘would’ have done. This will give you an idea of whether you’ll be successful and what type of spreads you’re best suited to. If you decide to do it for real, keep the stakes very small to begin with.
