Spread Betting on Xstrata | Trade Xstrata
Xstrata is a mining company first publically listed about ten years ago. It has a diversified range of markets, with copper being one of the major ones. However, it covers other commodities such as nickel, coal, zinc, vanadium, and the platinum group of metals, and produces engineering products that are well known within their industries.
Considered to be one of the top five companies in the mining sector, Xstrata has expanded rapidly by acquisition, and diversification in other commodities allows for a measure of stability in this volatile commodities sector.
You can see from this monthly price chart that Xstrata typifies the volatility of the mining industry. With the global economic crisis in 2008 the bottom dropped out of the market, following several years of steady growth. But since then there has still been marked volatility during the recovery, which you can see both from the up-and-down movement of the chart and also from the length of the candlesticks in the chart. Note particularly how much shorter they were on the left-hand side of the chart.
You should expect Xstrata to continue to consolidate and grow, particularly as its boss since inception has been ex-Billington finance director Mick Davis. For those who are prepared to do their homework and to bet responsibly, Xstrata can offer some good opportunities for profit.
When you look at spread betting or trading on a volatile stock price like this Xstrata, it is important that you protect your account from large losses. Because it is so easy to lose more than you mean to, beginners are often warned to stay away from high volatility stocks. But regardless of the stock volatility, when you develop a strategy or a trading plan you should always have limiting your losses uppermost in your mind.
In fact, you will often find experienced traders expressed the view that your task is to preserve your capital above all else, with profits simply happening from trading correctly. This is obviously not the way that beginners think of trading, where they assume the prime directive is to make the most money – after all, that is why they are tempted to start trading in the first place.
One of the easiest ways to limit your losses is to make sure that you bet less than you think you can afford, at least until you become a confident spread better. The difficulty with a volatile price structure is that you want to allow the price to vary without hitting a stop loss position, when you would close the trade. By definition, a volatile price may go in the wrong direction to a greater extent than a less volatile price, even if it ultimately goes in the direction you selected.
It is far easier to (wrongly) stay in a bet while the price runs against you than to close the bet and accept that you have lost. While the bet is open, that there is always a chance that it would turn around and go where you expected it to. It is only by being disciplined and cutting your losses that you will consistently make profits in the financial markets.
Spread Betting on Xstrata
Xstrata is a lively share to bet on, which is to be expected as it is in the mining sector, but is also because the company is actively expanding and taking over other companies. The current price for a rolling daily bet is 1179.8 – 1183.2. If you think the price is going down, you could place a short bet for £12 per point. As this is a short bet, you should not be charged for rolling it over to the next day every night. In theory, you might also receive some interest credited to your account, but this is unlikely with current interest rates.
So if your sell bet is successful, and the price goes down to a quote of 1052.1 – 1055.4, you could close your bet and work out how much you have made. Your spread betting company will do this for you, but the calculation is quite simple: –
- your sell bet went on at 1179.8
- and it closed at the buying price of 1055.4
- the number of points you have gained is 1179.8-1055.4, which is 124.4 points
- Your stake was £12 per point
- therefore you have gained 124.4 times £12, a total of £1492.80.
Your bet may have lost if the price went up, and you would have to close your bet before the loss became too great. Say it went up to 1205.6 – 1209.1, and you closed your bet. It is just as easy to work out how much you lost: –
- Your sell bet went on at 1179.8, and it closed at 1209.1
- The difference is 29.3, and as it was a short bet these points count against you.
- Your stake was £12 per point
- You have lost 29.3 times £12, which is £351.60.
It works just the same way if you had decided in the first place to place a long bet, betting that the stock price will go up. Say you bet £5 per point, and the price went up to 1256.3 – 1259.8.
- Your long or buy spreadbet went on at the buying price of 1183.2.
- The selling price when you closed your bet was 1256.3.
- That means the difference in points is 1256.3-1183.2.
- That works out to 73.1 points.
- The size of your spreadbet was £5 per point.
- Therefore you have won 73.1 times £5.
- This works out to a total of £365.50.
In this case, you might be charged a little each night when the bet is rolled over, but if you only hold onto the bet for a few days or weeks this is usually not large.
Once again, your bet may have lost and you need to cut your losses by exiting the trade quickly. Say the price went to 1156.1 – 1159.6, and you closed your bet for a loss.
- Your long or buy spread betting position went on at the buying price of 1183.2.
- The selling price when you closed your bet was 1156.1.
- That means the difference in points is 1183.2 -1156.1.
- That works out to 27.1 points.
- The size of your spreadbet was £5 per point.
- Therefore you have lost £135.50.
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