Spread Betting on IG Group

IG Group is a UK company headquartered in London, and is probably best known amongst the readers of this article as the world’s longest-running and largest financial spread betting company. It was founded in 1974 to trade gold as an index rather than as the physical metal, and IG originally stood for Investors Gold. It was shortened to the initials when other products started to be offered.

Spread Betting on IG Group

This is a daily OHLC (open-high-low-close) bar chart of the stock price, complete with Bollinger Bands indicating the expected range of trading.

The company rapidly expanded, and it was the first spread betting company to introduce Internet dealing facilities, in 1998. It officially became IG Group in 2000 when it became listed on the London Stock Exchange. In 2002, it entered the Australian financial markets with contracts for difference (CFDs) as soon as they were declared legal. In recent years, it has expanded its operations around the world.

With a management buyout it delisted from the LSE in 2003, but was subsequently relisted in 2005. It has not been able to crack the US market yet, despite buying HedgeStreet, a US derivatives dealer, in 2007. Currently, both spread betting and contracts for difference are illegal in the States, but IG has been working to get around the financial regulations by a redefinition of its derivative products.

The chief companies in the IG Group were IG Index, the spread betting provider, and IG Markets which handles CFDs and foreign-exchange bets. However, since September 2012 these divisions have been brought together under the banner “IG”.

You can see from the chart above that the pricing of IG is volatile, and may go both up and down. It is in a heavily regulated industry, so minor changes in laws can impact its profitability.

IG Group Holdings Rolling Daily

IG has been volatile recently, and in a downtrend. If you think this is going to continue you might want to place a short or sell bet on the stock, which is currently offered at 416.53 – 417.47 for a rolling daily bet. The short bet is placed on the selling or lower price, in this case 416.53. Say you choose to stake £15 per point.

If you are right, you might find that you are able to close your trade and collect your winnings when the spread betting quote is down to 368.27 – 369.21. With an opening price of 416.53 and a closing price of 369.21, your spread bet would have made 47.32 points. Staking £15 per point means you have won £709.80.

As the financial markets are always hard to predict, you should be prepared for a number of your spread bets to lose. One of the keys to successful financial trading is not to hang onto losing trades, watching them lose more in hope that they’ll recover, but to close them quickly and get on to the next trade. Say the price went up to 452.13 – 453.03, you could cut your losses and close the bet, losing 453.03 minus 416.53 points, which works out to 36.50 points. Multiplying by £15, this loss would cost you £547.50.

Another way to close out a losing spread bet is to set a stop loss order when you place the original trade. This requires your spread betting provider to close your bet for a loss when it reaches a price that you dictate, and means you do not have to be watching the market all the time. With a stop loss order, this trade might have closed at 441.36 – 442.28. This time you have lost 442.28 less 416.53 points, which is 25.75 points, costing you £386.25.

IG Group Holdings Futures

If you do not know when to expect the price to change, but are convinced that it must, then you may choose to use quarterly futures style spread betting, where you can open a bet and keep it with no additional charge until the expiration date, some months away. If you are bullish on IG Group, you might want to place a buy bet for £8 per point, with the current far quarter spread betting quote at 416.50 – 419.20.

After a few weeks or months, you might see that the price has gone up to 443.62 – 445.96, and decide to close the bet and collect your profits. Your bet was opened at the buying price of 419.20. You closed it at the selling price of 443.62. That means you have gained 443.62-419.20 points, which is 24.42 points. Multiplying this by your stake of £8 per point, your profit on this spread bet is £195.36.

It can also go the other way, of course. You might find that after you placed the bet the price goes down to such a point that you decide to cut your losses and close the trade. Say it went down to 398.61 – 401.43, and you decided to close the bet. Your bet was opened at the buying price of 419.20, but this time it closed at 398.61. The point difference is 20.59, so the bet would have cost you £164.72 with your wager of £8 per point.

Particularly when betting on a futures style bet, you may want to consider the stop loss order. This saves you having to keep a check of the price for fear that your losses will be excessive, as your spread betting provider will close your trade at the level of loss you tell him. With a stoploss order this trade might have closed at 405.67 – 407.98. With a starting price of 419.20 and a closing price of 405.67, this time you would have lost 13.53 points, which works out to a loss of £108.24.