What is Spread Betting and Why You Should Consider It

The Basics Of Spread Betting

If you’re reading this, I assume you’re already aware of the basics of betting and trading. For the unfamiliar, let’s review. The object of betting is to predict the outcome of an event with a certain degree of accuracy. In return for “paying” (or staking) money on the outcome of an event, you are granted (or earned) the right to “collect” (or win) money from the outcome. Typically, but not always, one person’s wager (or bet) is called a “lay” and the opposite is called a “lay” or “tournament”. For example, if you wager (or bet) that a given head-to-head matchup will end in a certain way, you are essentially saying that you believe the game will have that outcome. The term “spread betting” comes from the way that some bookmakers will “spread” the amount of money that is wagered on a particular matchup or event, as opposed to operating as a “pool” where every dollar is added up at the end and any money left over is given to the winner(s).

Spread betting can be performed using a variety of platforms and trading tools. Some of the more popular ones are:

  • Livestreams.com
  • Yahoo Finance
  • CNBC.com
  • ForexStreet
  • Trading Station
  • Interactive Brokers
  • Futuronics
  • Which one you should use is dependent on your personal preferences and the types of trades and positions that you’re interested in taking. For instance, if you’re looking to make lots of small wagers on the side, then Interactive Brokers is a great choice because they offer a low minimum deposit of just $2,000 with no fees or commissions. On the other hand, if you’re looking to make bigger wagers on a semi-regular basis then Futuronics’ platform is a better option because of the higher minimum deposit of $25,000 and the lower listing fees compared to other, similar platforms.

Why Should You Consider It?

In most cases, the appeal of spread betting is that, instead of having to wager a set amount, you are given the opportunity to wager a variety of amounts on the same matchup or event. In other words, you get to essentially “spread the risk” and you aren’t stuck to one betting position. Consider the following example:

Let’s say that you wagered $100 on the San Francisco 49ers to win the Super Bowl this year. In the end, the Niners did in fact win the Super Bowl, but only by a total of 3 points. You would lose $100 on the bet, but because you spread out the risk by placing smaller wagers on the other teams, you would end up taking home about $600 in profits, depending on the odds and payout of each wager.

Now, if you had put all of your money on the Niners and they had lost, you would have lost your entire $100, but at least you would have walked away with a $100 profit.

The appeal of this strategy is that, by “risking” or “betting” on a number of outcomes with varying odds, you can increase your chances of winning. Some of the more prominent proponents of this viewpoint are Tiger Woods, Mike Rooney, and Roger Chipsa.

While it’s true that spreading your bets can increase your odds of winning, it can also increase your risk of losing, as well. Let’s say that you put all of your money on the San Francisco 49ers and they do in fact win the Super Bowl. However, the point spread for the game is -5 and the 49ers win by 1 point. You would have won $100, but, because you committed to a single outcome (the Niners winning by 5 points), you would have lost all of your initial $100 stake. You are effectively starting from scratch because, in order to win, you would have to win by a margin greater than 5 points. In practical terms, this means that you would have to win the Super Bowl by at least 8, 9, or 10 points in order for you to recoup your initial $100 stake. This could be extremely difficult, considering the level of competition in the NFL.

The Difference In Calculating The Profits

The above example assumes that your initial bet (in this case, $100 on the 49ers) was wagered at even money (1/1). In order for you to come out ahead in the scenario, you need the 49ers to win by a margin of 5 or more points. In theory, this is quite easy to do, as the Niners won by 3 points. However, in practice, getting this kind of result from a single NFL game is extremely difficult, if not impossible. Most sportsbooks will list the “over” and “under” points for a given game, along with the point spread. This makes it much easier to figure out whether or not you won or lost, depending on the outcome. Let’s say that the over/under is set at 4.5 and, because of your 3 point win, your score is 4-3-4.5 (wins, losses, and ties). If your score is listed as 4-3-4.5, then you would have won. However, if it’s listed as 4.5-4-3, then you would have lost. In all likelihood, you will have won some money, but the exact amount will depend on the odds of the given game and whether or not you had success in placing bets on the other teams. Remember, you are effectively placing a “side” wager on the Dolchites vs Borgias game, where you are effectively betting on both teams to lose. In some instances, you may have profited from the Dolchites, but in others, you may have lost because of the Borgias.

Making Smaller Versus Larger Bets

The appeal of spread betting is that, in theory, it gives you the opportunity to make smaller, more manageable bets. In other words, you can put down a specific dollar amount and only lose this amount, rather than having to risk or lose the entire amount that you staked. This should prove to be favorable, considering how many people are discouraged from betting or trading by the financial industry, due to reasons of credit card debt and the like. By being able to bet or trade smaller amounts, you reduce the overall damage that could be caused by over- or under-betting. Consider the following example:

Imagine that you are a professional poker player – and let’s say that the game is 5-card draw, with each player getting 2 hands. You are playing against Larry Houdini, who is also a professional poker player. The problem is that Larry is good and you are bad. However, you don’t want to admit it, so you decide to play a little game of honest wagering. Larry reads your mind and decides to do the same. Finally, after a long time, both of you realize that you are both playing the same game and decide to settle the matter – by betting on it. Now let’s say that you bet $100 on the player that wins the hand. In the end, it was you that won the hand and you pocketed $200, while Larry took a loss of $200. However, if you had bet $500, then Larry would have taken a $300 loss and you would have ended up with a $200 win. In this case, you had only risked $400 and still came out ahead, due to your honest wagering. In theory, this is possible, as long as both players abide by the rules of the game. In practice, however, it’s unlikely that both players will agree to abide by the rules and settle things with a wager. This is why in most situations, a game of honest wagering will end in a “draw” where neither player comes out with any money at the end.

Making Bigger Versus Larger Bets

The flip side to the above scenario is that it’s also possible to make larger, riskier bets if both players are willing to do so. Consider the following example: