TalkTalk started as a company that provided conventional landline telephone services to consumers. The daily price chart below shows some interesting news driven price movement, but predominantly not much volatility and this would make it safer for spread betting by a novice, as long as announcement times were avoided.
The Group was founded in 2003 as a division of The Carphone Warehouse. It demerged as recently as March 2010 to become a standalone company. Its services now include Internet access and television, as well as telecommunications, and there have been several acquisitions to establish its market position. TalkTalk is now a broadband provider with its own infrastructure.
The company started with a landline based system, but in 2004 added broadband, and offered free broadband in 2006. In the same year, Carphone Warehouse bought the UK business of America OnLine (AOL) adding many more customers. By the end of 2009, they had more than 4 million broadband consumers.
After demerging in 2010, TalkTalk went on to develop the HomeSafe brand of online security and parental filtering. It launched its mobile telephone and television services in 2010. All has not been well with the company’s reputation, as it has the undesirable attribute of being the most complained about telecommunications company.
The effect of news on a share price is evident in the chart above. Six monthly results ending in September were announced on 13 October 2012, and they include the fact that the previous quarter have been the best for two years, and that they were going to make significant savings in their operations by simplifying business.
To the extent that these could have been foreseen, it would have been possible to spread bet on the massive increase in share price. However, even if you guess right on what the results will be, often the markets will react in a seemingly irrational way, so it is considered risky to trade around announcement time.
TalkTalk Telecom Group Rolling Daily
Recently TalkTalk has been in an uptrend, so if you think this will continue you may be tempted to place a long bet on the share price. The current spread betting quotation is 212.47 – 213.53 for a rolling daily bet. With a rolling daily bet, your account may be charged a little each evening when the bet is rolled over, but for the active trader this is usually not a significant amount. Say you risk a stake of £20 per point with a buy bet at 213.53.
Perhaps the price goes up as you hope, and you are able to close your bet and collect your winnings when the quote is 253.52 – 254.58. Working out how much you have won, the closing price is 253.52, up from the opening price of 213.53. That means that you have gained 39.99 points. Multiplying by your stake of £20, you have made £799.80.
Sometimes the price will not go in the direction that you think, even if all the indicators that you checked tell you it should have done. When that happens, you need to close your bet and accept your loss. Say the price drops down to 184.17 – 185.23, and you decide to cut your losses and close the trade. This time the closing price would be 184.17, so taking that away from the opening price you find you have lost 29.36 points. That works out to £587.20.
Many smart spread betters use a stop loss order to protect their accounts. A stop loss order means that your losing trade will be closed whether or not you are checking on the markets, as your spread betting provider will automatically end it for you if it reaches a certain level that you set. With a stop loss order, this trade might have finished at 196.98 – 198.04. 213.53 minus 196.98 is 16.55 points, which means you would have lost £331.
TalkTalk Telecom Group Futures Style Bet
If your trading strategy is midrange in outlook, anticipating holding a bet open for a few weeks or months, then you may find that a futures based bet is more suitable for your style. The current spread betting quotation for the far quarter futures bet on TalkTalk is 212.90 – 215.47. You might choose to bet £12 per point on a buy bet, going long at 215.47.
Considering first the favourable case of the price moving up and your bet working out, say you decided to collect your winnings when the quote was up to 251.63 – 253.75. Your long bet would close at 251.63. You have gained 251.63 minus 215.47 points, which is 36.16 points, so multiplying by £12 your profit works out to £433.92.
Even though you have taken out a futures style bet for the far quarter, which expires between six and nine months away depending when you take it out, you can close the bet any time you want, either to take a profit or to cut your losses. If the price went down as soon as you had opened the bet, you may choose to close your trade to prevent further loss. Perhaps it went down to 188.76 –191.24. In this case the closing price would be 188.76. 215.47 less 188.76 is 26.71 points. £12 times 26.71 is a loss of £320.52.
Another way that a losing bet can be closed, this time without you taking further action, is to place a stop loss order when you take out the original bet. Your spread betting provider will take care of closing your losing bet once it reaches a level that you set. With a stop loss order, your trade might have been closed earlier, when the price was 196.45 – 198.73. The points difference between 215.47 and 196.45 is 19.02, so you would have lost £228.24 using a stop loss.