What is Spread Betting?
Spread betting is a different type of betting to traditional fixed odds, where stake and payout are fixed at the time the bet is struck. In spread betting, the payout depends on the variance from the spread that you took. Put simply, with fixed odds you are betting on the outcome of an event, and if you win you get a set payout. With spread betting the payout you receive depends on the number of points you win by.
An Example Spread Bet
Say England were playing France in the Rugby, and you took England -8 at the spread. This is essentially a handicap bet, as for your bet to succeed England would need to win by at least 8 points. The difference with a spread bet is you are staking per point rather than a fixed amount.
In our example If you staked $100 per point, and England won by 15 points, you would get a profit of $700. Alternatively, if France were to win by 4 points, you would lose $1200. The way to calculate this is
Profit or loss = (spread taken + final margin) * stake
In this case the final margin is the number of points England win or lose by. So if England win by 15 points (say the score was 30-15), our payout would be $700. We have a final margin of 15 points, minus the 8 point spread, gives us a 7 point win. As we staked $100 per point our payout is $700
If England lose by 4 (score of 23-27 for example), we would lose $1200. We have a final margin of -4, added to the spread of -8 leaves us with a 12 point loss. $100 per point means we lose $1200.
If the margin lands exactly on your spread, it is a ‘push’ meaning you get your money back.
Difference between Fixed Odds and Spread Betting
Now that we know how fixed odds and spread betting differ, we’ll delve into the difference as a punter. The most important thing to be aware of is that just because something is good value at fixed odds, it doesn’t mean the same bet would be a good bet at the spread. If we take the prior example of England vs France in the Rugby, hypothetically England may be a good bet at -8 on the spreads, but -8 at $1.90 fixed odds might not be a good bet. Here’s why.
In spread-betting, we are interested in the mean.
In fixed-odds betting, we are interested in the median.
If England will cover the -8 more than about 53% of the time (enough to cover the bookies’ margin), they are a good bet at fixed odds. But whether they are a good bet at the spread will depend on variance. Say England cover the -8 60% of the time. If you were to place $100 on them each time at $1.90 over the course of one-hundred matches, you would end up $1400 ahead at 14% ROI – a very good rate!
But let’s say that each time they cover, they cover by an average of 4 points (or win the match by 12). And when they don’t cover, they generally lose the game by an average of 2 points (which means the result is 10 points away from the -8 spread).
Over the course of one hundred bets at the spread, these are the calculations;
100*4*60 – 100*10*40 = -$16,000, or an average loss of $160 for each $100 staked! Even though the spread is covering more than 50% of the time, you are bleeding money because the mean is well under the median.
Considerations and Strategy
There are a couple of important considerations here. Firstly, when you stake on a spread, your ‘stake’ is actually much higher than the amount you put down per point. In the example above, your $100 per point is more like a $500 wager, assuming that the average variance from the line in a Rugby match is around 5 points (it may be a fair bit higher than this – Rugby not my strong suit). It’s important to be aware of this, as well as being aware of your max loss – which most bookies will allow you to set when placing the bet. Spread betting can get out of hand quickly, and you need a much bigger balance than your likely profit/loss on each bet, as the bookie will usually keep a reserve far above the expected variance as an insurance measure for them. If you have two or three pending bets, this can add up quickly.
The second is that you need to know the difference between the mean and the median expected result when placing a bet. When the upside is quite high but the predictability is low, spread bets can often be good. A great opportunity for spread betting is when a team is riddled with injuries, lacking motivation or for whatever reason seem to have hit a roadblock and have the potential to get blown out of the water completely. Often you can get a lot of upside on the margin, provided the bookies haven’t cottoned onto this in their market, with minimal downside if you think this team isn’t capable of blowing the opposition out of the water. Spread betting is less valuable when the variance in a result is low – unless you are willing to stake up to cover the lower variance, but that could leave you exposed to a lot of risk if there is an outlier result.
Ultimately your risk profile will have a big say in which type of betting you prefer. A higher risk profile lends itself to spread betting and a lower risk profile lends itself to fixed odds. Both are valuable assets and the savvy punter will want to use both at different times. Just make sure you know the difference between the mean and the median expected result before you do!
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