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Spread Betting Explained

Published on: 19/08/2011

One of the problems with “straight up” bets, simply picking a side to win or lose, is their predictability. Stronger sides win and weaker sides lose. The public would soon lose interest in wager and bookmakers would find it difficult to make a living if all betting were limited to such choices.

As it happens, other types of bets go well beyond picking the winner of an event. One of them that has gained a significant following in recent years is known as “spread betting,” and it involves predicting not only which side will be successful but also how wide the margin of victory will be.

Simply stated, spread betting gives a handicap to the underdog in a contest in order to make the competitors more evenly matched. For instance, if Manchester United are favoured at home over a lesser Chelsea club, there would be very few wagers on the Blues. To compensate, the odds makers offer an inducement called the “Point Line,” such as “Man Utd -1.” In other words, a “spread” of one point will be subtracted from the Red Devils’ final score when the match concludes. Similarly, the Point Line for Chelsea would read +1, meaning they receive a handicap of one goal.

To avoid the possibility of draws, bookmakers often use half-point spreads, such as “West Ham -0.5.” If the Hammers win outright, the bet can be claimed, but if the match ends in a draw, their opponent would “cover” the spread and prevail. In this way, spread betting can be quite like Asian Handicap betting.

Interestingly enough, powerful teams that chalk up excellent win-loss tallies often compile poor records “against the spread” (ATS). This is a statistic of great importance to bettors. Whenever the spread is large, wagering on weaker side by “taking points” suddenly becomes very attractive versus backing the favourite and “giving points.”

Bookmakers earn money on spread betting by taking from the winners a small commission. This margin goes by several names such as “vigorish,” “vig” or “juice.” Five percent is not an unusual amount, although it can go as high as ten. For example, a winning £20 wager on “West Ham -0.5” might pay a profit of £19 instead of evens. If the bookmaker is able to “balance the action” by having about the same amount wagered on either side of the spread, a profit is guaranteed thanks to this margin.

Quite a few interesting opportunities for bettors arise in the process of spread betting. If wagering is heavy on West Ham at -0.5, the bookmaker may adjust the line by offering new odds at -1.5. This in no way effects wagers that have already been made; the Point Line remains unchanged for those. However, the adjustment should attract more wagers on the opponent and cause a slowdown of betting on West Ham.

Whenever the Point Line moves, there are opportunities created to “hedge” bets. This is a bit like taking out insurance, and in some cases it may even be possible to win both ways. For example, a bettor who has already invested £20 on West Ham -0.5 is expecting they will win by a goal or more. If an opportunity come up to wager on the opponent at +1.5, making a £20 wager on the other side will pay double if the Hammers succeed by exactly one goal and only lose £1 otherwise.

Minimized risk and the possibility of winning by backing a loser are the two main advantages of spread betting. This has already become the most popular type of betting in the United States, and it has been credited with increasing the number of gamblers in the U.K., now near the one million mark. There is, however, one variation of spread betting offered through betting exchanges that adds even more risk and reward to wagering.

Unlike the traditional bookmaker, a betting exchange never puts up its own money on either side of a wager. Instead, its sole task is to pair up bettors by allowing them to wager directly against each other. Bettors are allowed to set the spread on their own by “backing” the favourite or “laying odds” on the underdog.

For example, a customer of the betting exchange might want to back West Ham with a spread of -1.5. Another customer will be found laying odds on their opponent at +1.5 and these two will be paired. If a third bettor offers Chelsea -0.5 and finds no takers, the bet will be declared “off” when the match begins. Wagers are active only when accepted by an offer on the opposite side at the same odds.

Spread betting on exchanges can be especially exciting when bettors take advantage of the zeal of fans. Unwarranted confidence in the market allows much wider spreads to be offered than in traditional markets, and that adds to risk and reward.

A popular variation of spread betting in the U.S. is called the “teaser.” It allows bettors to set their own Point Lines. By paying a surcharge and/or agreeing to accept a potential payout of less than even money, the bettor can obtain additional points and turn West Ham -0.5 into West Ham +0.5 or even +1.5, thus creating a win out of any anticipated result other than a huge upset.

Published on: 19/08/2011 © Bet Bind