As part of your overall trading plan, it is a good idea to spread bet UK 250 shares. They give reasonable volatility, but still have stability.
For instance, Balfour Beatty PLC is currently quoted at 244.89 – 246.51 on a rolling daily bet. The target price is 268, a resistance level that has been established on two occasions recently, and the support level is 240, giving a good risk to return ratio. You place a spread bet for £20 per point for the price to go up.
After a little while, the share price has risen to a quotation of 266.52 – 268.14, and you decide to close your bet. As it is a long bet, it closes at the lower price of 266.52.
Here is how you can work out how much you won: –
- the total number of points that you gained is 266.52-246.51, that is 20.01
- your bet was for £20 per point
- the amount you won is therefore 20.01 times £20
- your total winnings are £400.20
If instead the price of Balfour Beatty had gone down, you are prepared to exit your bet and cut your losses. Say the price came down to 239.12 – 240.74. It has broken down through support, and therefore you want to minimize your losses by closing the bet. The bet closes at 239.12.
This is how you figure out your loss: –
- the total number of points that you lost is 246.51-239.12
- that means you lost 7.39 points
- multiply this by your stake of £20 per point
- you lost a total of £147.80
Another UK 250 company is Dixons Retail PLC, and a futures based bet for the middle of next year is quoted at 11.117 – 11.272. This one has also been trading near the bottom of its range, and you hope it will come up to about 12.8. The lower limit is about 10.4.
You take a long bet for £50 per point at 11.272, hoping to cash in well over 12 1/2 in a few weeks time. The index goes up as expected, and you close your bet at 12.621 – 12.775. The total number of points that you have gained is 12.621-11.272, which is 1.349. When you multiply this by the stake, you have won £67.45.
If the stock price had started out downwards, and then gone down through the support level you had identified, you would have to close the bet to minimize your losses. Say it got to 10.367 – 10.512. You close your bet at 10.367, and then work out how much you have lost.
You opened the bet at 11.272, and closed it at 10.367. That means that you lost 0.905 points. You staked £50 per point, so this loss amounts to £45.25.
Each example above you will note that the possible gain that was greater than the possible loss. It’s a good policy to look for this, because it means you can lose as often as you win, and still make a profit.
How to Spread Bet UK 250 Shares
The UK 250 shares are preferred by some people for spread betting over the top 100, as they don’t tend to move as quickly in price. That is not to say that price movement isn’t what we’re looking for when we’re spread betting, just that some of the UK 100 (FTSE 100) shares, the largest in the market, can move extremely rapidly. This may mean that you are “stopped out” prematurely on an otherwise profitable position; or that a rapid shift in price takes you way beyond where you wanted to exit and cut your losses on a losing bet.
The UK 250 (FTSE 250) shares are mid-cap companies, with a market capitalization from around £300 million to the size of over £1 billion, before you get to the FTSE 100 levels. Most spread betting companies will do all the FTSE 100 constituents, but you need to check whether your spread betting provider covers the size of shares that you want to bet on. Many will do the FTSE 250 level, or in overall terms take care of the FTSE 350 listed shares, and then cut off at the smaller cap companies.
One disadvantage of spread betting on the mid-cap size companies is that the spreads may be larger than on the big companies, particularly first thing in the morning when you should usually avoid placing any bets. When you have wider spreads, that means you have to hope for the price to move further to get into profit, and that any profit is reduced. However, if you choose wisely you will find many well-known companies that have great prospects, and also some that have very poor prospects if you want to go short.
If you are used to trading or investing in shares, then you will have a good idea of how to find the best prospects for a “long” position. Coming from that background, statistically you are less likely to have dabbled much in “shorting” shares, and that is something that you need to become comfortable with when you are spread betting, taking advantage of the ease with which you can do it.
By the way, if you are already investing, you may want to consider using spread betting in conjunction with your shareholding. For instance, if you have a longer-term hold that you expect to go higher, but don’t have the capital required to invest in it, you can take out a spread bet and still profit from the share price move. In this way, you avoid capital gains tax, stamp duty, and other costs. On the other hand, if you have a longer-term hold which you do not want to sell because of capital gains, but you expect it to reduce in value in the short term, you can take out a short spread bet that will cover your losses, again without other charges. You do not need to sell your shares, and buy them back later when the price has fallen, with all the costs involved in that.