Spread Betting Microsoft Corporation Shares
Trading Microsoft (MSFT:NDQ) shares. Although for some it will seem that Microsoft Corporation has been around “for ever”, others may be surprised that it was founded as long ago as 1975. To spread bet on Microsoft is to trade on one of the largest and most divergent technological companies on the planet.
It has achieved its position by good fortune, acquisition, and being in the right place at the right time. It started by selling BASIC interpreters to the embryonic desktop computer market, and dominated the home computer operating system market with MS–DOS. Nowadays Microsoft Office software is a market leader, and a recent major acquisition was Skype, for which it paid a record $8.5 billion.
Although Microsoft has consistently increased its dividends on shares over the past few years, its share price is remarkably the same: –
This is a monthly price chart, and apart from an expected dip during the global economic recession, you can see the price has been fairly constant. Some investors think that this is an indicator that now is the time to buy the shares, with a price-earnings ratio closer to 10:1 instead of the 30:1 of a few years ago; but for the trader interested in spread betting, there is no particular indication that a price adjustment will happen soon.
The internet behemoth has admittedly missed the mobile revolution and is now catch up with its launch of the Windows 8 operating system and Surface tablet
computer. The company is also trying to penetrate the tablet computer market. As with all technological companies, the Microsoft share price is likely to vary with the latest news, whether about its products or about its rivals such as Apple. Some traders like to bet on news events, and others prefer to spread bet on the signals of technical analysis. For those keeping up with events, it is worth noting that the latest Microsoft thrust is to integrate and interconnect PCs of all types, tablet computers, and the latest Windows-based smartphones. To this end, Microsoft is currently launching Windows 8. The success of this effort will doubtless be reflected in the share price in due course.
Microsoft Shares Trading Example: Microsoft Corporation Rolling Daily
While Microsoft Corporation is a giant company, and for the aggressive conventional investor may not offer the prospects of growth which a smaller startup business might, it is in the technology field and driven by consumer attitudes and reactions, which means the price is volatile and suitable for spread trading. The current price for a rolling daily bet is 2933 – 2940.
If you believe that the shares are undervalued and will increase in the near future, you might want to place a long bet at a price of £3 per point. Because the price of the shares is nearly $30, you can expect the price to fluctuate by many points, and will probably want to place smaller stakes on this company than on some others.
Suppose you are correct, and the price goes up to 3121 – 3128. If you decide to close your bet and collect your winnings, you can work out how much you have won like this. Your long bet was placed at the price of 2940, and it closed at the price of 3121. Taking one from the other, you have a point difference of 181 points in your favour. At £3 per point, you would have won £543.
Consider now the opposite case, the price falls after you place your bet. Perhaps it goes down to 2826 – 2833 before you close your trade. Figuring out how much you have lost, you take 2826 away from your starting price of 2940, to find that you have lost 114 points. Multiplying by your stake, that amounts to £342.
It is often a good idea to place a stop loss order when you take out a bet, as this saves you watching the market all the time, and can close your bet before your losses become too large. Say that with a stoploss order your wager was closed when the quote was 2879 – 2886. Your entry price was once again 2940, but this time the spread bet closed at 2879, a loss of 61 points. Your losses would amount to £183.
Microsoft Corporation Futures Based Betting (MSFT)
When you spread bet, you have the choice of rolling daily or futures based bets. If you think that your bet will take a few weeks or months to resolve into profit, then the futures style bet may save you money. Microsoft Corporation, quoted on the NASDAQ, is in the technology sector and therefore volatile, but because of its size the price can move more slowly than that of others in the sector.
The current price for a far quarter spread bet on Microsoft is 2920 – 2948. If you think the price will be going down, perhaps because of the competition from Apple and others releasing new products, then you could place a short bet at the selling price of 2920 for, perhaps, £2 per point.
If you are correct, you might find that the price falls to 2786 – 2810, and decide to take your profits. In this case, the opening price was 2920, and the closing price is 2810, as a short bet closes on the then current buying price. That means you have made 110 points, which works out to £220.
Suppose that the price did not move in your direction, and that you decided that you needed to close your bet and cut your losses when the quote was 3002 – 3024. Again, the bet closes on the buying price, this time 3024, so the number of points you lost is 3024 minus 2920. This works out to 104 points, which would cost you £208.
Many spread betters decide to place a stop loss order when they open the bet, as this saves them having to watch the market all the time, and can work to take them out of a bad bet with minimal loss. If you had taken out a stoploss order, and the price still went against you, you might find that the bet was closed at 2972 – 2995. Working out your losses this time, 2995 less 2920 is 75 points, and that would cost you £150 for your chosen stake.
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