Spread betting is a form of gambling on the outcome of any event where the more accurate the gamble, the more is won and conversely the less accurate the more is lost. The spread represents the index firms’ margin.
For example, if a bettor places a bet on an underdog in an American football game when the spread is 3.5 points, he is said to take the points; he will win his bet if the underdog’s score plus 3.5 points is greater than the favorite’s score.
Spreads may be specified in half-point fractions to avoid ties, or pushes. The winner of a North American spread bet wins the amount that he has bet, while a losing bettor loses the amount wagered plus the bookmaker’s commission, which is commonly known as the vigorish or vig, and is usually 10 percent of the original wager; in the United Kingdom both sides are held at odds of 9-10. (A “teaser” is a bet that alters the spread in the bettor’s favor by a predetermined margin, often six 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; a teaser bet on the favourite would mean that the bettor takes 2.5 points instead of having to give the 3.5. In return for the additional points, the payout if the bettor wins is less than even money.
In the United Kingdom spread betting has come to resemble the futures market. Unlike fixed odds betting the amount won or lost can be very large, as there is no single stake to limit the maximum losses. However, it is usually possible to place a “stop loss” with the bookmaker, automatically closing the bet if the value of the spread moves against the better by a specified amount. “Stop wins” are the opposite, closing the bet when the spread moves in a better’s favor by a specified amount.
