Spread Betting on ExxonMobil Corporation | Spread Trading

Exxon Mobil Corporation is the largest of the oil corporations, producing nearly 4,000,000 barrels of oil per day. It is a favourite for spread betting as it combines the excitement of volatility with the underlying stability of a large corporation. Exxon operates multinationally in 21 countries, and is based out of Texas. It has grown in size through mergers and acquisitions, of which one of the most significant recent ones was XTO Energy, a natural gas driller, in 2010, which bolstered its position in the natural gas market and took its gas reserves to more than its oil reserves.

Trade ExxonMobil Shares

Although in common with many companies ExxonMobil crashed during the global economic crisis of 2008, current values have nearly returned to the peak prior to that time. This is a weekly price chart which shows a reasonable amount of volatility and variability.

The Daily Telegraph in 2012 named Exxon Mobil “one of the planet’s most hated corporations”, and cited several reasons for this. These include the increasing amount of drilling in countries which are not recognized as democratic, the corporate scepticism towards global warming, and even the slow response in 1989 to the Exxon Valdez oil spill in Alaska.

The merger of Exxon and Mobil happened in 1999, but the companies can trace their history back to Standard Oil which was originally founded in 1870. From an investor’s point of view, the company is in excellent health, with debt at less than 10%, and over $8 billion in cash. It has positioned itself to profit from both gas and oil developments, and thus stands in good stead in the energy field.

For the spread trader, the energy sector provides good volatility, which equates to excellent opportunities for profit for those who can stay on the winning side. If you are a novice, then volatility can be dangerous and you must take care to size your bets appropriately, ensuring that you do not lose more than you should.

ExxonMobil Rolling Daily SpreadBet

As a leader in the energy industry, you can expect a reasonable amount of volatility from this stock, and should size your bet appropriately. The current price for a rolling daily bet on Exxon Mobil is sell at 9125, and buy at 9134. Say that after careful analysis you decide that the shares are overpriced and due for a correction, you could take out a short or sell bet for £2.50 per point.

Suppose you are correct, and that the price falls to 8652 – 8661. You might choose to take your profit, closing the bet at 8661. To calculate your winnings: –

  • The starting price was 9125
  • The ending price was 8661
  • The difference in points is 9125 minus 8661
  • Which works out to 464 points
  • Your bet was £2.50 per point
  • Your winnings are therefore £1160

However, many times your spread bet may not win, and you are forced to close your bet for a loss, moving on to the next trade. Perhaps in this case the price might have gone up, and you would decide to close your spread bet when the quote reached 9437 – 9446. For this spread trade: –

  • The starting price was 9125
  • The ending price was 9446
  • The difference in points is 9446 minus 9125
  • Which works out to 321 points
  • Your bet was £2.50 per point
  • Therefore you lost £802.50.

It often works out easier to use a stop loss order to close a losing trade. With one of these, your spread betting provider will close your losing bet automatically, so you no longer have to watch the markets all the time. With this, you might find that the bet closed when it reached 9380 – 9389. You would have lost 9389 less 9125 points, or 264 points, and that would have cost you £660.

ExxonMobil Futures Based Spread Betting

All spread bets have to have an expiry date, as it is part of the definition that allows them to be treated as bets, and therefore not subject to taxes. You have a choice of a daily rolling bet, when your spread betting provider will automatically “roll over” or close one bet and open another each day, or of futures based spread bets which expire some months in the future. The current quote for a far quarter futures bet on Exxon Mobil is 9167 – 9201. Feeling bullish, perhaps you would place a buy bet for £1.50 per point.

For this example, assume that you are correct and the price goes up to 9386 – 9421. You could close the bet and collect your profits. Working out first the difference in points, your starting price was 9201 and the bet closed at 9386, for a point difference of 185. At £1.50 per point, this means you have won £277.50.

But not all bets are successful, and you may find that the price drops to 9051 – 9083. Fearing that it will continue to fall, you close your bet and accept your loss. 9201 minus 9051 is 150 points. Multiplying by your stake, you have lost £225.

Even though this is a futures style bet, expiring several months in the future, it can be closed at any time either to capture your profit or to mitigate your losses. Many traders use a stop loss order to realize their losses before they become too large, as a stoploss order will close the trade once a certain level of loss is reached. With a stoploss order on this trade, you might find that the bet would be closed when the price dropped to 9115 – 9143. In this case, you have lost 9201 less 9115, which is 86 points. For your chosen size of stake, this amounts to a loss of £129.