IBEX 35 (Spain 35) Fundamentals
The IBEX 35 is Spain’s benchmark stock market index, comprising the 35 most liquid companies listed on the Madrid Stock Exchange. It reflects the performance of Spain’s top companies and offers exposure to sectors like banking, energy, and telecommunications.
The IBEX 35, sometimes called the Spain 35, is the Spanish market index and is popular for spread betting because of its volatility, which you can see in the chart below.
IBEX stands for Indice Bursatil Espanol in some translations, or simply Iberia Index, according to other authorities. Regardless of which acronym applies, it is the stock index for the Bolsa de Madrid, the main stock exchange in Spain. It is a market capitalization weighted index comprising 35 companies.
The rules for entry into the index include the amount of trading volume over the previous six months, with certain provisos on the frequency of trading, and a weighting according to the total market cap with a factor for the amount of freely traded shares, i.e. shares not in block ownership.
Madrid’s benchmark, the IBEX-35 only been in existence since 1992, even though it has been calculated back to 1989 to set its base value of 3000. Its highest price was in 2007, just before the global economic crash, in contrast to most other Western stock indices which set their records during the dot.com time of 1999 and 2000. Construction and real estate stocks helped its rise through the beginning of the 21st century.
Currently, the larger influences on the index are the financial shares of Banco Santander and BBVA, the utilities of Iberdrola, Repsol the petrol company, and Inditex, which markets clothing. The largest representation is from Telefonica, the telecommunications giant, which represents about 1/5 of the index value.
How the IBEX 35 Works
- Key Features:
- Market-capitalization weighted, giving larger companies like Banco Santander, Iberdrola, and Telefónica more influence.
- Volatile, influenced by both European market trends and global macroeconomic factors.
- Suitable for traders looking to benefit from both short-term price swings and longer-term economic trends.
- Volatility:
- Offers frequent trading opportunities due to its sensitivity to economic and political developments in Spain and the EU.
With the financial crisis that has grabbed the European markets, the index has been naturally impacted by news and debt fears that hit the eurozone in 2007 ultimately bottoming to 5,956.2 in summer 2012 although it then subsequently recovered some ground. The crisis hasn’t spared Spain with its very high unemployment rate of over 25%. [December 2013]. Spread betting on the Ibex 35 makes a change from the majors such as the Dow, NASDAQ, and FTSE, and can provide some exciting opportunities for trading.
Key Considerations for Trading the IBEX 35
- Understand Market Drivers:
- Sector Influence: The IBEX 35 is heavily weighted toward banking (e.g., Banco Santander), energy (e.g., Iberdrola), and telecommunications (e.g., Telefónica).
- Global Trends: Spain’s economic health is closely tied to broader European Union policies and global market trends.
- Domestic Factors: Political events, unemployment rates, and fiscal policy can also drive significant movements.
- Use Risk Management:
- Stop-Loss Orders: Set limits to minimize potential losses.
- Stake Sizing: Adjust your stake based on your risk tolerance and the index’s volatility.
- Leverage Technical Analysis:
- Use tools like RSI, Fibonacci retracements, and Bollinger Bands to identify trends and potential entry/exit points.
- Monitor Currency Impact:
- The strength of the Euro (EUR) can influence international investments and the IBEX 35’s performance.
IBEX 35 Rolling Daily
Suppose you believe that the Ibex 35 is currently headed for further downside pressure following another quarter of negative growth, as it appears from the chart above. You might be tempted to go short on this index, which is currently quoted at 8151.6 – 8160.6 for a daily rolling spreadbet. Say you decide to stake £1 per point at the selling price of 8151.6.
Perhaps the price will drop over the next few weeks to a level of 7548.6 – 7557.6. You decide to cash in your bet and collect your winnings. Your bet was placed at the selling price of 8151.6, and it closed at the buying price of 7557.6, which means you have gained the difference, 594 points. With a stake of £1 per point, it is easy to see that you have won £594.
Not all bets work out the way you want them to, so you also need to be able to work out your losses, when needed. Perhaps the price went up to 8453.1 – 8462.1 and you decided to close the bet and accept your loss. The opening price for your bet was 8151.6, and you closed it when the price went up to 8462.1. As this was a short bet, an increase in price means that you have lost. Taking 8151.6 away from 8462.1, you have lost a total of 310.5 points. For your stake of £1 per point, this amounts to a loss of £310.50.
If you don’t have time to watch the markets, and are concerned that you may miss closing a losing position before it becomes a major loss, you might place a stop loss order on this bet. With a stop loss the bet could have been closed when the quote was 8332.5 – 8341.5. The closing price in this case is 8341.5, so subtracting 8151.6 you find that you have lost 189.9 points. Again it is a simple calculation to see that this amounts to £189.90.
IBEX 35 Futures
Now we look at a short position, with a futures style spread bet. The current quote for the far quarter spread bet is 8151 – 8163. If you believe that the price is going down in the next few weeks or months, you could take out a short bet, selling at 8151 and staking perhaps £1 per point.
As the first example, assume that your bet works out and the price falls, finally reaching 7246.5 – 7258.5. At this point you decide that it has dropped as far as you can expect it to, and that you should close the bet and collect your profits. With an opening price of 8151 and a closing price of 7258.5, you have gained 892.5 points with your short bet. For a stake of £1 per point, this is the same as £892.50.
Even the best of traders make many losing bets. Suppose that this one did not work out, and the price went up to 8452.5 – 8464.5, at which time you decided to cut your losses and close the bet. With a starting price of 8151, the price went up to 8464.5, a difference of 313.5 points which counts against you. For £1 per point, that amounts to a loss of £313.50.
Many spread betters use stop loss orders to help them better manage their losses. If the bet goes into a loss, the stop loss order requires your spread betting provider to close the trade when it reaches a certain level, and you do not have to keep watching the markets yourself. In this case, a stop loss order might have triggered when the quote was 8331.9 – 8343.9, taking you out of the losing bet at 8343.9. Taking 8151 away from 8343.9, your loss works out to 192.9 points. With the stake of £1 per point, the stop loss order has kept your losses down to £192.90.
Why Trade the IBEX 35?
- Sector Diversity: Offers exposure to Spain’s key industries, such as banking, energy, and telecommunications.
- Volatility Opportunities: Provides frequent trading opportunities due to its price swings.
- Global and Domestic Relevance: Reflects Spain’s economic performance within the European and global markets.
