Spread Betting French Shares

For a change from spread betting on the UK or US stock markets, or simply spread trading the market indices, with many spread trading companies you are able to bet on individual stocks in different countries. For instance, IG Index offers a large range of shares of French companies, and is currently quoting 3739.3 – 3746.7 for Total SA, the oil company, on a daily rolling bet.

If you think that these shares will increase in price, you might want to place a spread bet for £4.50 per point. This would be at the buying price of 3746.7. Imagine that a little later, the quotation for this company is 3823.2 – 3830.6, and you decide to close your bet and collect your winnings.

It is easy to work out how much you have won. Your bet will close on the selling price, which is 3823.2, so your total number of points gained is 3823.2 less 3746.7, which is 76.5 points. Your bet was for £4.50 per point, so multiplying that out means you have won £344.25. As it was a daily rolling bet, if you held it overnight there would have been a slight charge for interest to deduct from your winnings.

If you had judged it wrong, and instead of the price going up, it went down, then you would reach a point where you needed to close the bet to minimize your losses. Say the price dropped to 3721.1 – 3728.5, and you decided that was far enough and closed your bet.

Once again it is an easy calculation to see how much money you are down. Your bet was placed at 3746.7, and the closing price for the bet was 3721.1. That means that you lost 25.6 points, which at £4.50 per point works out to £115.20.

Another company trading on the French stock market is Michelin, well known for their tyres. You can take out a futures based bet on Michelin at 4522.3 – 4554.1. Say you think that the stock value is going down, and “short” or “sell” the stock at 4522.3 for £5.00 per point. The price falls to 4478.2 – 4508.7 and you close your winning bet at the buying price of 4508.7.

The number of points that you have gained is 4522.3 less 4508.7, which is 13.6. At £5 per point, you gained £68. This highlights one problem with futures based bets – usually the spread is larger than with a rolling daily bet, due to the uncertainty and the time it has to run. The daily bet on Michelin currently has a spread of nine points, this one has a spread of more than 30 even though it is only one month away.

Consider if your bet had been a loser. If instead of falling the price had risen just 20 points, and you decide to close the bet and cut your losses when the quote was 4542.3 – 4574.1, the number of points you would have lost is 4574.1-4522.3, which is 51.8 points for a total loss of £259. Comparing this to your winnings for a drop of 44 points shows the disadvantage of the large spread. Many times it is worth taking a daily rolling bet, and paying a small amount of interest each day, rather than paying a larger spread on a futures bet which has no interest payments.

Other Notable Companies

SANOFI: Despite being a so-called defensive stock – one that should offer some protection during market downturns, due to a constant demand for its products – French drugmaker Sanofi faces a number of challenges. It has already had to cut a substantial number of jobs in France, having scaled back plans under pressure from the French government.

PEUGEOT: Another French company also making redundancies is carmaker Peugeot. Plans to cut a substantial number of jobs in France have been criticised by the French industry minister. Political intervention has become a common theme in France, the second strongest eurozone economy, which will heighten uncertainty for French companies.

How to Spread Bet French Shares

You may know the French stock market best from the CAC 40 index, the index of the 40 dominant companies traded on the stock exchange in Paris. But many spread betting companies provide the means for you to spread trade on individual shares in that market, and of course with spread trading you are never involved with currency exchange issues. Those of us old enough to remember the French franc are in the same position as the youngsters for whom the euro is the defining European currency.

There are some well-known names in the French stock market, including Total Oil, Sanofi-Aventis pharmaceuticals, and France Telecom, as well as the more obvious companies such as Renault and Michelin. In contrast to some of the smaller countries, the French economy is fairly robust, despite having some problems in the euro crisis.

Total Oil is the largest company in France, and the sixth largest in Europe (the third largest oil company in Europe). It has a lot of cash on hand and has made many acquisitions, all of which help it weather economic difficulties. Sanofi may not be the first pharmaceutical company that comes to mind when you think of that sector, though it is a giant company, but the famous US investor Warren Buffett must see it as a good bet, as he is one of the major shareholders.

For its part, France Telecom appears to be an unexciting company, but has deep ties to the frontier market of Africa, where it is trying to double its market share. It already owns a 40% stake in one of Morocco’s mobile phone companies.

These are just examples of opportunities that you may not have considered previously, but which are available to you through your spread betting provider. Spread betting is best considered on a short-term trading time span, not as a long-term investment, and indeed legally must have a time limit to be considered a bet. That is why a daily rolling bet must be rolled over each night, even though this is usually done automatically by your provider. Futures style bets always have an expiration date.

When you first consider betting in a market that is not familiar to you, you should take time to study it for a couple of weeks and get a sense of how it moves. Some markets are apt to be jittery at the open, and some have a lazy lunch period when nothing seems to happen. If you want to succeed at spread trading in an unfamiliar market, you need to pay attention to these factors, and more generally to the amount of volatility that you can expect to see in any individual share price.

Once you determine the sort of volatility that the individual security typically experiences, then you will be better placed to know how far away to place your stop loss order, the one that will save you from losing your shirt on the bets that go in the opposite direction to what you want.