Goldman Sachs is a multinational investment company which was founded in the 19th century. Such companies have become good prospects for spread betting because of the economic issues of recent years. Goldman Sachs has come to notoriety from its intimate involvement in the global economic meltdown, which has sparked a great deal of controversy over its practices. Nonetheless, it is one of the foundations of American economic life, undertaking many financial tasks including being a primary dealer for the United States Treasury securities. Many ex-employees move on to take responsible positions in the US government.
The volatility of the stock price is apparent from the monthly price chart above, which includes 2008, the primary year for economic problems. One of the issues has been that, despite all the market issues, it seems that principals are still receiving outstanding bonuses for their presence.
Goldman Sachs was also apparently involved in hiding the economic problems in Greece for at least a decade, so that the true level of national debt was not apparent, and of even creating credit default swaps (CDS), one of the financial instrument types at the heart of the global economic crisis, for Greece in September 2009 to mask the true risks involved.
The result of such market turmoil is evident in the share prices shown in the chart above, although you can see that the value of Goldman Sachs has recovered significantly from its low of less than 5000 in 2008.
If you’re interested in spread betting on Goldman Sachs, then you need to bear in mind the history and the tendency towards revelations that can cause dramatic price shifts. As with all spread betting, but particularly when there is volatility involved, you must be careful to correctly size your position, and if necessary err on the safe side. Apart from that, the market sentiments will be revealed by technical analysis and you can use this to decide on your trading direction, as well as target levels.
Goldman Sachs Rolling Daily Spreadbet
So you want to speculate on one of the of the world’s biggest investment banks right? Goldman Sachs is a volatile share, and subject to large changes in price following news revelations, therefore when you are spread trading on it you need to be careful so that you are not caught out.
How will you spread bet Goldman Sachs shares? You believe the investment bank’s share price is likely to fall over the next few weeks due to persisting market turmoil. The current price for a rolling daily bet on Goldman Sachs is sell at 11,416, and buy at 11,425. If you think that the value is going down in the next few days, you may want to place a sell or short bet at the price of 11,416, with a stake of say £1.50 per point, bearing in mind the volatility and the size of the price.
First, consider that your bet may prove to be a winner, and the price goes down to 10,857 – 10,866. Closing the bet and cashing in at this time, you have gained 11,416-10,866 points, which is 550 points. With a stake of £1.50 per point, that adds up to winnings of £825.
Secondly, you must also consider that your bet may lose, particularly when you are spread betting on a volatile share such as this one. If the price goes up to 11,796 – 11,805, then you might want to think about cutting your losses and closing the bet. The bet opened at 11,416, as before, and this time closed at 11,805 for a difference of 389 points. With your size of stake that amounts to a loss of £583.50.
Many traders decide to use a stop loss order, which is usually placed when you open your initial bet. This requires your spread betting company to close your bet at a certain losing level, and can save you money and time watching the market. With a stoploss order on this bet, you might find that the price would go up to 11,722 – 11,731 before it activated. Your losses now are 11,731 minus 11,416, which is 315 points or £472.50.
Goldman Sachs Futures Spread Betting
For those who prefer to predict the market several weeks or months out, futures based bets are more straightforward and sometimes cheaper, despite the increased spread that you usually pay. The current price for the far quarter futures based bet on Goldman Sachs is 11,454 – 11,489. If you are optimistic about Goldman Sachs and want to take a bullish position, you may choose to bet £1 per point at the buying price of 11,489.
Over the course of time, you might find that the price goes up to 12,361 – 12,389. As this is about the level of target price you had anticipated, you decide to close your bet and collect your profit. The starting price was 11,489, and the closing price is 12,361, which gives you 872 points, or £872 profit.
On the other hand, you might find that the price falls to such a level that you need to close the bet for a loss, simply to avoid a possible greater loss if it kept falling. Perhaps you close your bet when the price is quoted at 10,763 – 10,795. Figuring out your loss, your bet was placed at 11,489 and closed at 10,763. The difference between these is 726 points, which simply translates to £726 lost.
The stoploss order can be valuable in protecting you from undue losses. It requires your broker to close your trade if it loses more than a certain amount, and does not need any intervention from you. With a stoploss order, you might find that your bet was closed earlier at 10,915 – 10,947. Once again your starting price was 11,489. This time the exit price was 10,915. 11,489 minus 10,915 is 574 points that your trade lost. As your chosen bet size was £1 per point, this amounts to a loss of £574.