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Understanding Spread Betting

Anyone who has engaged in sports betting for some time now probably has a deeper appreciation of the "wisdom" behind spread betting, which can either be perceived as "more complicated" than the simple "who wins or lose" wager, or a "more fun" way of engaging in betting on sports events. Either way, spread betting is growing in popularity—the proof can be seen in the countless sports betting sites offering an extensive array of modifications on this type of wager.

Rationale

Spread betting was invented by American mathematics teacher-turned-bookie Charles McNeil in the 1940s, probably because of the limitations of the simple "which team will win?" kind of wager—if you're dealing with a historically strong team going against a weaker team, people would flock to bet on the team that is perceived to most likely win. More often than not, there were instances when no one would bet on the losing team, which would make the bookie's position problematic. That's why McNeil's "point spread" invention was "groundbreaking" in the sense that it has since made possible a richer betting experience that allowed bookmakers derive as much action as possible from people's wagers.

Spread betting, therefore, takes the focus from the simple outcome of who either wins or loses, and instead "spreads" the focus on a set of outcomes and also gives people a chance to bet in such a way that includes the losing team without actually betting on the said losing team to win (which may unlikely win). The "spread" in this context is a range of several outcomes, and bettors would bet on whether the game's outcome will be above or below the spread.

In such a way, the bookmakers are able to create a "market" for bettors even when two teams with highly uneven characteristics (or with a great gap between being the favorite and being the underdog) are playing against each other. The bookie simply makes money by taking bets on both sides of the "spread" and not on both sides of the two opposing teams—see the difference? To put it simply, instead of the old "Will the favorite team win?" spread betting essentially revises the question into "Will the favorite team win by more than the point spread?" Moreover, the bookie can freely adjust the point spread to any level in order to ensure that the number of participants on each side is equal.

As you may realize, there is some level of mathematics involved in spread betting, although sports bettors are usually just happy to make their bets instead of bothering with math. Spread betting (or its working principles) has also moved beyond the boundaries of sports betting. In fact, it is also being used in what is called financial spread betting (which, instead of sports, plays with the stock market, e.g., shares, derivatives and bonds). It is also finding application in other areas or markets, such as housing prices or any other commodity whose market behavior can be observed and, therefore, betted on.