Spread Bet on Pearson Shares | Trade Pearson
Everyone knows someone called Pearson, and you may be wondering what is special about a company called Pearson. After all, you probably prefer trading and spread betting on companies that you know. The fact is, however, that you probably know a lot more about Pearson and its products than you realize. Pearson is a leading education company, and responsible for many well-known names. It was founded in 1844 as a construction company, but in 1919 invested in merchant bankers and in 1921 bought some local newspapers.
In 1957 it bought the Financial Times and bought half of The Economist. It also owned Westminster Press and the publisher Longman. It was publically listed in 1969 on the London Stock Exchange, and bought Penguin books in 1970 and Ladybird books in 1972. It was involved in British Satellite Broadcasting (BSB) before that was taken over by Sky, and bought the education part of Simon and Schuster in 1998. Even though all this would be enough for many lesser companies, in 2000 Pearson acquired National Computer Systems (NCS) and began to venture into educational assessment systems. Adding National Evaluation Systems, a US firm providing teacher certifications, in 2006 plus other sundry companies established it firmly in the education field, providing curriculum materials, multimedia and testing programs.
Nowadays most of its book publishing is done under the Penguin brand, with all the diverse companies brought together under one label. The Financial Times group is a leading business information company, and Pearson is now the largest education company and the largest book publisher in the world.
With a diverse outlook, despite the fact that printed books are sometimes regarded as going out of style it appears that Pearson will be continually developing and expanding into other sectors. Its share prices have been subject to some ups and downs recently, following massive growth during the first 10 years of the century. It responds well to technical analysis, and has suitable volatility for spread trading.
Pearson Rolling Daily
This weekly price chart shows the volatility as well as the recent growth in the shares of Pearson. The current quotation for a rolling daily spread bet is 1140.9 – 1143.1. You might think that is going to increase in value, and decide to place a spread bet for £3.50 per point at the buying price of 1143.1.
If you are correct, you could see the quotation go up to 1256.3 – 1258.5, and as this is approaching the upper Bollinger band which would act as a resistance to further gains, you could decide to cash in and collect your winnings. To work that out, you first note that the long bet was placed at 1143.1 and was closed at 1256.3, for a gain of 113.2 points. Multiplying this by £3.50, you have winnings of £396.20.
If the price did not go your way, and fell, you might decide to minimize your losses by closing your trade when the price hit 1053.2 – 1055.4. The long bet closes at the selling price, in this case 1053.2. 1143.1 minus 1053.2 is 89.9 points, and that works out to a loss of £314.65.
What many spread traders decide to do is place a stop loss order at the same time as they take out their bet. This tells your spread betting company to close your trade if it is losing at a level that you set. While it does not guarantee the price that you will receive, once the stoploss order is triggered it becomes a market order which sells your position right away, which means you should receive nearly the price that triggered it. Say in this case your stop loss order closed your bet at 1096.1 – 1098.3. This would have cut down your loss. 1143.1 less 1096.1 is 47.0 points, and multiplying that by your stake of £3.50 per point you would have lost £164.50.
Pearson Futures Based Bet
When you are spread betting on a medium-term timeframe, you may consider using futures based bets, which are generally available for near quarter, mid-quarter, and far quarter expiry dates. If you use them, there are no further charges to your account while you hold the bet open, unlike the rolling daily bet which accrues interest charges each evening. The current far quarter quotation for Pearson is 1143.6 – 1155.6.
Considering the price may fall, you decide to place a short or sell bet for £4 per point. The bet goes on at the selling price of 1143.6. After some time, you may find that your bet is working out and that the price has gone down to 1065.2 – 1075.7. If you cash in at this level, you will have gained 1143.6 minus 1075.7 points, or 67.9 points. Multiplying by four, you have winnings of £271.60.
If it didn’t work out for you, and the price went up rather than down, you would have a losing position that you would need to close to prevent further loss. Say the price went up to 1195.7 – 1205.9. Closing your spread trade at this point, the price you would be out of the trade is 1205.9, the buying price. That means that you have lost 1205.9 less 1143.6 points, or 62.3 points. For your chosen stake, this would have cost you £249.20.
Many traders let their spread betting broker do the work when it comes to a losing bet. If you place a stop loss order on your spread bet when you open it then you do not have to watch the market for an adverse move, as your broker will close the losing trade for you if a certain price is reached. In this case, perhaps the trade closed when it reached 1182.5 – 1193.2. You have lost 1193.2-1143.6 points, which is 49.6 points. That means that your total losses have been kept down to £198.40.
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