Norway 25 Spread Betting | Norway 25 Spread Trading
The Norway 25 index is the index for companies on the Oslo Stock Exchange (OSE), and as such reflects the Norwegian economy. This exchange has not only Norwegian companies, but also attracts some international companies, mainly in the shipping and oil industries. It is one of the oldest stock exchanges, started as a meeting place for investors in 1819. However stocks and bonds were only traded formally from 1881. Trading is now fully electronic, with no trading floor.
The Norway 25 is also called the OBX, the Oslo Børs Index. It is made up of the 25 most liquid companies in the OSE, and is revised twice a year to demote and promote the constituent members. It started a level of 100 in 2003, and now is quoted at nearly 400. However it has been higher before the global economic crisis, reaching a level of 522 points in May 2008.
If you look at a typical chart of the Norway 25, you will see that it has exhibited great volatility, particularly recently.
Depending on your experience, this will either ring alarm bells in your head, or fill you with anticipation. In fact, if you are inexperienced it may do either of these, but it should present a warning to you. You can see that there are many occasions where the price has gapped from one day to the next, and this can be a problem for you if it has gone in the wrong direction, as you may not have a chance to close out a losing bet at the level you want.
Any time you make a spread bet, you must realize that it could go in either direction, and that even the best of traders cannot say with certainty which way it will run. Therefore you always have a stop loss position figured out, which works back from the maximum amount you want to accept losing and sets a price level at which you must close a losing trade. If the chart gaps, meaning that the index never trades at certain prices, you may find that the jump in price has exceeded the amount that you are comfortable losing, and you have to take a bigger hit.
One answer to this is to use a guaranteed stop loss, and with a chart as fragmented as this one you may want to give it good consideration. With a guaranteed stop loss, your spread betting broker will let you set a level of price which is the worst you will have to pay, with a losing bet. In effect, it is an insurance that you will not be caught out. However, for every bet you place the spread, the difference between the buying and selling prices, will be larger to pay for this, which reduces your effective profit every time.
The alternative is to make sure that your bets are small enough that even a jump in price does not seriously hurt your account, but in this case your profits will also be smaller.
Spread Betting on the Norway 25: Oslo Stock Exchange (OSE)
The Norway 25 is a volatile index, and you need to ensure that you have made adequate plans for betting on this financial security, including a spread betting trading strategy that will limit your losses even if it gaps in price, as has been seen several times on the chart in recent weeks. The current price is 395.06 – 395.76, a relatively low number for an index bet, and to compensate for this IG Index require a minimum bet size of £10 per point.
As an example of a bet on this index, suppose you wager £25 per point that the index will go up. Your bet will go on at the buying price of 395.76. If you are correct and the price goes up, you might close it when the quote is 413.82 – 414.52. You can work out how much you won in the regular way, multiplying together the number of points and your stake per point.
- The bet was opened at 395.76.
- The bet closed at 413.82.
- The number of points gained is 413.82-395.76.
- The total number of points gained is 18.06.
- Your stake was £25 per point.
- Therefore you have gained 18.06 times £25.
- Your total winnings are £451.50.
If you have it wrong, and the price goes down, then you will want to close your bet and accept the loss before it becomes too large. Say the price goes down to 392.13 – 392.73 and you decide that you have to close the trade.
- The bet was opened at 395.76.
- The bet closed at 392.13.
- The number of points lost is 395.76-392.13.
- The total number of points lost is 3.63.
- Your stake was £25 per point.
- Therefore you have lost 3.63 times £25.
- You have lost a total of £90.75.
For a second example of a bet, consider going short on the index, which is betting that the price will go down. Place a bet of £40 per point at the original selling price of 395.06. Say the price drops to 371.92 – 372.52 and you decide to close your bet and collect your winnings. As this is a short bet, it closes on the upper or buying price.
- The short bet was opened at 395.06.
- The bet closed at 372.52.
- As it was a short bet, you gained 395.06-372.52 points.
- That is 22.54 points.
- Your stake was £40 per point.
- You have won 22.54 times £40.
- Your total profit is £901.60.
You might have bet in the wrong direction and the index goes up. If so, you need to close your bet quickly and minimize your losses. Say the price rises to 398.21 – 398.91, and you exit your trade.
- The short bet was opened at 395.06.
- The bet closed at 398.91.
- As it was a short bet, you lost 398.91-395.06 points.
- That is 3.85 points.
- Your stake was £40 per point.
- You have lost 3.85 times £40.
- Your bet has cost you £154.
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