Spread Bet on RSA Insurance Group
RSA Insurance Group is a multinational insurance company headquartered in London, but with clients around the world in Asia, Europe, and North and South America. Its roots have nothing to do with Africa (RSA commonly stands for Republic of South Africa), as the initials come from the last two insurance companies that merged in 1996 to form the group, Royal Insurance and Sun Alliance. Prior to that, Sun Alliance was formed from a merger in 1959 of The Sun and The Alliance, founded in 1710 and in 1824 respectively. Royal Insurance was founded in 1845.
Although the company was called Royal & Sun Alliance when first formed, the initials were formally adopted in 2008. Having said that, at least one spread betting provider (IG Index) still refers to the company as Royal & Sun Alliance.
Performance of this company has been unspectacular in recent years. It was not affected much by the global economic downturn in 2007 – 2008, but has suffered a gradual decline since then. In 2009 it committed to a 15% staff reduction in the UK. It currently services about 20 million policyholders with more than 20,000 staff.
Insurance is typically a boring sector of the markets. It is one of the “need to have” items on many people’s budgets, which worked in its favour during the economic slowdown, where discretionary spending was hit hard. However it is a steeply competitive field, as is evidenced by the number of advertisements for various types of insurance, and that means a slight disconnect on pricing or facilities with a market can have a much larger effect on the customer base.
For spread betting purposes this is a fairly steady stock, with not too many surprises expected. It will respond well to technical analysis and provide the novice spread trader with good practice.
RSA Insurance Group Rolling Daily
The RSA Insurance Group is one of the largest insurers in the country. Its stock price has been on a general decline in the last few years and its current spread betting quotation is 100.50 – 100.70 for the rolling daily bet. While long-term stock performance is no indication of short-term expectations, you may find from your technical analysis and strategy that you expect the price to go down, and therefore you place a short or sell bet for £18 per point.
Supposing that you are correct, you could find that the price goes down to 82.36 – 82.56, and at this level you decide to close your bet and collect your winnings. As it was a short bet, it started at the selling price of 100.50, and closed at the buying price of 82.56. The difference between these is the number of points you have gained, 17.94 in this case. As you bet £18 per point, your profit would be £322.92.
If on the other hand you are incorrect, and the stock price goes up after you placed the bet, you may find that you need to close the bet and accept your losses. Perhaps the price went up to 114.62 – 114.82, and you ended the trade. Your starting price was at 100.50, as before, but this time the spread trade finished at 114.82, giving you a point difference of 14.32. For your chosen stake, this works out to £257.76.
Many spread traders find it an advantage to use a stop loss order, which will close out your trade automatically if a certain loss level is reached. Perhaps in this case it would have closed your losing bet at 109.95 – 110.15. As it was a short bet, it closes on the higher buying price of 110.15. The difference in points is 110.15 less 100.50, which is 9.65 points. At £18 per point, your losses run to £173.70.
RSA Insurance Group Futures
If you’re not looking at the shortest length of trade, but anticipate holding a spread bet open for a few weeks or months before it is profitable, then you may choose to use a futures based bet. For the RSA Insurance Group, the current spread betting quotation for the far quarter, more than six months away, is 100.66 – 101.87. If you think that the price will go up, you could place a long bet for £25 per point. The long bet is entered at the buying price of 101.87.
Perhaps time passes and the price goes up until it reaches 115.62 – 116.70, at which time you decide that you want to take your profits, perhaps to free up the money to use elsewhere. You close the bet at the selling price of 115.62, and count up your gains. The bet started at 101.87, and closed at 115.62. That means you gained 13.75 points. As your bet was for £25 per point, you have won a total of £343.75.
Unfortunately, sometimes the price does not move as you anticipated. The price might have fallen, and you would be left with making the decision to close your spread trade for a loss, rather than watching the price fall further. Say it dropped to 89.13 – 90.25 before you managed to close the trade. The bet started at 101.87, as before, but this time it closed at the selling price of 89.13. 101.87 minus 89.13 is 12.74 points, which amounts to a loss of £318.50.
A popular tool amongst traders is the stop loss order. This tells your spread betting company to close your bet when it reaches a certain losing price, whether or not you are logged in or watching the markets. Sometimes it can close your losing bet earlier, before you realize how far it has moved. Say in this case the price dropped to 95.61 – 96.50, and the stoploss order triggered. This time your exit price was 95.61, which taken away from the opening price of 101.87 amounts to 6.26 points. That would have cost you £156.50.
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