Spread Bet on United Utilities Group plc Shares
United Utilities is a comparatively new company, but based on long-standing older companies. While you might feel that the provision of water and sewage services to 7 million people is a very stable company goal, the share prices have not yet recovered from a massive drop in the global economic crisis, as can be seen from the monthly price chart below.
United Utilities provides water and sewage services in Northwest England, and as such is heavily government regulated, with prices reviewed every five years. Therefore United is required to maintain standards and not always price its service commercially. The company was formed in 1995 when North West Water and NORWEB combined. The head office is in Warrington and the company employs 9000 people.
During the time it has been in existence, United has been listed on the New York Stock Exchange then delisted, and has retailed telecoms and electricity supplies, which have also been sold off. This allows United Utilities to concentrate on its water and sewage business, for which it owns 184 reservoirs. It has made many improvements in the past few years, reducing network leakage and improving water quality standards, and plans to improve many thousands of kilometres of water and sewage piping. It even has plans for a national water pipeline which would run supplies from Manchester down to London.
From a spread betting point of view, you can see that the chart is very stable, not to say unexciting. While the narrowing of the Bollinger Bands in recent months suggests there may be a breakout, either up or down, the length of the candlesticks in the chart indicates that the price is not volatile, and that a breakout should unfold gradually. You may find that it does not offer the opportunities for profit that you are looking for, but against that the risk of spread betting on this stock would also be low.
United Utilities Group Rolling Daily
United Utilities provides water and sewer services to North West England. It is a stable and heavily regulated business, with share prices that are not subject to much volatility. The current quote for a rolling daily bet is 661.8 – 663.2. As an example, suppose you believe the price will go up, and place a long bet at 663.2 for the amount of £18 per point.
If you are correct, and the price increases it may go up to 684.7 – 686.1, for example. Closing your spread bet at this price, you can work out how much you have profited. Your long bet was placed at the buying price of 663.2, and it closed at the selling price of 684.7. 684.7 minus 663.2 is 21.5 points. As you staked £18 per point, you have won £387.
You should also be prepared for the price to go the other way. It might go down to 646.8 – 648.2, when you could decide to close the bet to prevent any further loss. The starting price of your bet was 663.2, and the ending price was 646.8. The difference between these prices is 16.4 points, which for your chosen stake means you have lost £295.20.
Many spread traders use stop loss orders, which are usually placed when the bet is made. These take you out of a losing bet once it reaches a certain level, and they save you the strain of watching the markets every hour of the day. With a stop loss order, your losing spread bet might have closed at a price of 653.5 – 654.9. The exit price would be 653.5. Taking this away from 663.2, you find you have lost 9.7 points. In this case the stoploss order worked to reduce your losses. With a loss of 9.7 points and a stake of £18 per point, your total losses are £174.60.
United Utilities Group Futures Style Bet
You could decide that you want to take out a futures style bet on United Utilities. The price is relatively slow-moving, and you may have to wait some months for it to make much progress. The current price for a quarterly futures bet for the far quarter is 662.7 – 670.7. If you think that the stock price is going to go down, then you could take out a sell bet, also called a short bet, at the price of 662.7, and you might stake £24 per point.
After a few weeks or months, you might see that the price has gone down to 638.2 – 644.3, and decide to close your bet for a profit. Your spread bet was opened at the price of 662.7, and it closed at the price of 644.3. 662.7 less 644.3 is 18.4 points. Your bet was £24 per point, which means you would have won £441.60.
But what if the price went up? At some point you would need to close your losing bet and accept your loss. Say you decided to get out of the trade when the price went up to 681.3 – 687.7. As before, your bet opened at 662.7, and this time it closed at 687.7. That means you lost 25 points. With a stake of £24 per point, your loss would have cost you £600.
If you had used a stoploss order to cover your trade, you might have found that it cost you less. While an ordinary stop loss order does not guarantee the price that you will close your trade at, usually it is fairly close to the value that you name for your order. Say it took you out of your bet when the price went up to 675.3 – 681.2. With a starting price of 662.7, and the closing price of 681.2, this losing bet would have cost you 18.5 points, and that is worth £444.
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