Spread Bet on HSBC | Spread Trading

HSBC Holdings, commonly referred to as simply HSBC, is an international banking and financial services company headquartered in Canary Wharf, in London. By different measures, it ranks as one of the world’s largest two or three banks, and is very soundly based, surviving the global economic recession and even assisting other banks with funding at that time.

HSBC was formed in London in 1991 from the Hong Kong and Shanghai Banking Corporation, and was principally a tool to allow the Corporation to buy Midland Bank, establishing a significant UK presence. The original bank first opened in Hong Kong in 1865, and is still the largest bank in Hong Kong. The relocation to London as headquarters had two incidental purposes. One was a needed UK presence in order that the Midland Bank takeover would be permitted, and the other was a move away from Hong Kong before the scheduled transfer of sovereignty to China.

Although the primary listing is in London, HSBC has secondary listings on the Hong Kong Stock Exchange, the Paris Stock Exchange (Euronext), the New York Stock Exchange, and the Bermuda Stock Exchange. HSBC has expanded significantly around the world, making acquisitions in South America in the 1990s, and in North America too, even though it divested itself of some banking interests later, retaining a credit card division.

HSBC is run very conservatively, and on a typical trading day would see no more than 15 points range in price. As such, you might think that it was not a good choice for spread betting, but a comparatively slow-moving price can give the novice spread trader a little more time to think about their strategies. While you will not get the fireworks of a volatile stock such as a mining company, you are more likely not to be caught out by sudden moves giving you losses.

Spread Betting HSBC Rolling Daily

HSBC Rolling Daily

The monthly chart shows that HSBC has still to recover all the losses suffered in the global economic crisis, but you can also see that most of them were made up in a short time, and HSBC is a conservatively run bank with large reserves. The current spread trading quotation for a rolling daily bet is 554.5 – 555.7.

Perhaps you believe that HSBC prices are due to go up in the next few days. You may choose to place a rolling daily bet for perhaps £25 per point in the long direction, and this would go on at the buying price of 555.7. If you are correct, then you may choose to close your bet when the price reaches 591.2 – 592.4. The number of points you have gained is 591.2 minus 555.7, which works out to 35.5. Multiplying by your stake of £25 per point, you have made a total of £887.50. As this is a rolling daily bet, there may have been a small charge levied to your account each evening when the bet was rolled over to the next day, but provided the bet is only open for a few weeks this will usually not be a significant amount.

Of course, you should be prepared for your bet to lose, as will happen some of the time. Perhaps the price went down to 529.6 – 530.8, and you chose to close your trade and accept your loss. The spread bet would have closed at 529.6, which means you have lost 555.7 less 529.6 points, or 26.1 points. Multiplying by £25, that’s a loss of £652.50.

An alternative that many spread traders do is to set a stop loss order when they take out the bet, and this will close a losing trade for you even when you’re not watching the market. If perhaps this closed when the price was 539.2 – 540.4, your losses would have been limited to 555.7 less 539.2, or 16.5 points. In this case you would have lost £412.50.

HSBC Futures Style Bet

HSBC is a large multinational banking and finance house, and you will find that the value of its stock changes relatively slowly. For spread betting, you may choose to place a futures style spread bet, and hold it for several weeks or months. The current price for the far quarter futures style bet is 555.8 – 562.6. If you think the price will go down over the next few weeks or months, then you could place a sell or short bet at the price of 555.8, staking perhaps £18 per point.

Say you are correct, and the price goes down to 522.6 – 528.5. If you then close your spread bet and collect your winnings, you can work out how much they are like this. Your bet was opened at a price of 555.8, and closed at 528.5. That gives you a point difference of 27.3 points. Your stake was £18 per point, so your profit amounts to £491.40.

Whenever you place a spread bet or trade on the financial markets, you must be aware that you could easily lose. Say the price went up after you placed your bet, so you are forced to close it for a loss at 579.2 – 584.3 before you lost any more. This time you have lost 584.3-555.8, which is 28.5 points, and that would cost you £513.

Many spread betters decide to place a stop loss order on each spread bet that they take out, and this means that the spread betting company will close your bet once losses reach a certain level that you dictate. This saves you having to watch the market all the time. If you did this on the bet above, you might find that your losing position was closed for you at 572.9 – 577.3. This time your losses have been kept down to 577.3 less 555.8 points, which is 21.5 points. You would have lost £387.