Spread Betting Eurasian Natural Resources Corporation
Eurasian Natural Resources Corporation (ERNC) is a young company set up as part of the privatization program of Kazakhstan, which occurred in the 1990s. It was added to the London Stock Exchange in 2007, and has a secondary listing on the Kazakhstan Stock Exchange. As the name implies, the company is interested in extracting natural resources, particularly by mining. The company has six divisions, mainly dealing with the various resources withdrawn – the ferroalloys division, iron ore, aluminium, other nonferrous, energy, and a logistics division.
The company operates in Kazakhstan, and also in China, Russia, Africa, and Brazil. It has a major impact on Kazakhstan, accounting for about 3% of the country’s GDP, and employing about 65,000 people there. In common with many mining companies, assets are bought and sold, particularly as finds are developed.
ERNC currently mines copper and cobalt in the Democratic Republic of Congo, coal in the Mozambique, platinum in Zimbabwe, and fluorspar in South Africa. It is the largest iron ore mining enterprise in Kazakhstan, and the world’s ninth largest producer of alumina. Outside of the mining sector, it provides more than 15% of the electricity used in Kazakhstan.
Looking at this monthly price chart you can see just how volatile a mining company can be, which is why some investors avoid them. However, if you are trading rather than investing, and looking for the short-term, then volatility can be a good thing, presenting you with profitable opportunities. ENR has been a lacklustre stock in recent times, troubling for investors but no problem for spread betting, where you can profit just as much if not more from prices going down.
Having said that, you need to be experienced and/or very cautious to handle volatile pricing. If you decide to trade on the share values, be careful to protect your capital and cut your losses if it becomes obvious that your latest move is not going to win.
How to Spread Bet on Eurasian Natural Resources Shares: Rolling Daily
If the volatility of a mining company appeals to you, then you may consider spread betting on ENRC, a company based in London, founded on resources in Kazakhstan, but now dealing with resources across Europe, Asia and Africa. The current price for a rolling daily bet is 555.4 – 556.6. Supposing you believe that the stock is currently overpriced and due for a fall, you could place a short bet, or sell at 555.4, with a stake of say £5 per point.
If the bet goes your way, you may find that you can take your profits when the quote is 432.6 – 433.8. Working out how much you have won, the difference between 555.4 and 433.8 is 121.6 points. At £5 per point, this works out to £608.
But even successful traders make losing trades, and can lose as much as half the time. They make a profit by cutting their losses before they become large, so that the wins bring in more money than the losses take away. Say that this bet did not go your way, and you had to close your bet for a loss when it reached 630.8 – 632.0. This time the bet went on at 555.4, but closed at 632.0, which means you lost 76.6 points. Multiplying by your stake, the bet would have cost you £383.
Successful traders also frequently make use of stop loss orders, so that losing trades are closed quickly, and without the trader having to watch the market all the time. Say in this case you had placed a stop loss order with your spread betting provider which closed your spread bet when the quote reached 596.2 – 597.4. Once again, the bet closes on the higher (selling) price, this time 597.4, which means you have lost 42.0 points. Multiplying by £5 pounds per point, you have lost £210.
Eurasian Natural Resources Corporation Futures
Eurasian Natural Resources Corporation (ENRC) is in the mining business, with other involvements such as power generation in Kazakhstan. If you want to place a longer-term bet on ENRC you might consider a futures based spread bet. The current price for the nearest quarter futures bet is 555.9 – 558.1. If you consider that the price will go up in the next few weeks or months, then you could stake £7 per point at a price of 558.1.
If you are correct, and the price goes up, you might decide to take your profit when it reaches 622.3 – 624.5. This means that you have gained 622.3 less 558.1 points. To remember which price to take, just remember that when you win it is as small as possible, and when you lose the point gap is as large as possible – it has to be so that your spread betting provider can afford to stay in business. So you made 64.2 points, which for your given stake is £449.40.
If the price goes down, putting you in a losing position, you may choose to close the trade and accept your loss when it reaches 506.2 – 508.5. Your bet opened at 558.1, and closes at 506.2, the worse price of the two. Therefore you lost 51.9 points, and that would cost you £363.30.
Even if they have time to watch the prices, many traders decide to use stop loss orders to cover their losses, as this is easier and less stressful than deciding when to close a losing spread bet. If you had put a stoploss order on this spread trade when you took it out, you might find that the position is closed earlier, at a price of 521.2 – 524.0. The bet started at 558.1, and closed at 521.2. 558.1 less 521.2 is 36.9 points, and that is a loss of £258.30.
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