The Cookson Group is a materials technology company which provides materials to customers worldwide. It is headquartered in London, and you can see from the daily price chart below there has been a lot of activity in these shares, making them exciting for spread betting.
The company was founded as long ago as 1704, when in Tyneside it specialized in metal and glass. In the mid-19th century it went into lead manufacturing, and in 1930 was first listed on the London Stock Exchange. In 1979 it bought the Oster Company which produced nonferrous metals, and in 1987 it bought Vesuvius Crucible Company producing ceramics. It is now headquartered in London and currently de-merging its various operations.
In 2005 there was a decision to focus on high-technology products, and in 2012 the decision was made to split the company into two separate entities. The chemical and materials division will come under a company called Alent, and ceramics will become a separate unit called Vesuvius. The demerger is supposed to be advantageous to shareholders as the board sees it as a way of maximizing the value of the businesses, and current shareholders will receive one ordinary share in each company.
Therefore, if you are interested in spread betting on the Cookson Group, you will need to keep abreast of the news which is likely to cause some major price movements. The name Cookson Group will disappear under current plans, and depending on the share valuations the companies may slip out of the FTSE 250 after de-merging.
No doubt in response to some of this news, the chart shows a great deal of volatility, most of which has proved predictable from the MACD. The market seems to be reacting favourably to the plans, as you can see from the strong uptrend now in process.
Cookson Group Rolling Daily: How to Spread Bet on Cookson Group Shares?
Looking at the chart, you may decide that the current uptrend will continue, and place a long bet for £12 per point. When you place it, the rolling daily quote is 643.4 – 646.6. With a rolling daily bet, your account may be charged a small amount each evening when the spread betting provider automatically rolls over the bet the next day. Usually this amount is not large, as long as you do not intend to hold the bet open for a long time, such as months.
For this example, assume that the price goes up to 673.1 – 676.3. To work out how much you have won you need to figure out the difference in points. The bet was placed at the buying price of 646.6, and it closed at the selling price of 673.1, a difference of 26.5 points. Multiplying this by your stake of £12, you find that you have won £318.
The second example is to figure out a loss. Suppose the price falls to 622.61 – 625.81. This time from the starting price of 646.6, your bet has fallen to 622.61. 646.6 minus 622.61 is 23.99 points. Multiplying this by your wager gives a result of £287.88 lost.
Many spread traders, particularly those who do not have time to watch the markets all day long, use the stop loss order to require the spread betting company to close losing bets when they reach a certain level of loss. With a stop loss order, you might find that this trade would be closed for you when the price goes down to 628.55 – 631.75. Taking 628.55 away from 646.60, you find that you have lost 18.05 points, a little better than when you were watching the markets yourself. 18.05 times £12 works out to a loss of £216.60.
Cookson Group Futures Style Bet
For a slightly longer view of the market, you may decide to place a quarterly futures style bet. These bets have no rollover charge and can be held open until the expiration date; however, you can also close them at any time to cut your losses or to take your profits. The current price for a far quarter spread bet is 645.3 – 651.1.
With a bearish view for the medium-term, you decide to place a short or sell bet on the Cookson Group. Perhaps you stake £8 per point. If things work in your favour, you might find that the price goes down to 600.75 – 606.55, and then close the bet to collect your winnings. Your bet was opened at the price of 645.30 and closed at the price of 606.55, giving you a gain of 38.75 points. Multiplying this by your stake, your total profit on this bet is £310.
When you are trading the financial markets, you must expect losses. Suppose the price went up to 680.94 – 686.74 before you realized that it was not going to work out for you. You have lost 686.74-645.30 points, which is 41.44 points, and that would cost you £331.52.
One of the important lessons in trading is to keep your losses low, and if you are relying on seeing the prices before you react, you may find that, as above, you are losing rather too much. The answer may be to place a stop loss order when you take out your bet, as then your spread betting provider is required to keep an eye on the prices. With a stop loss order this bet might have been closed when the quote was 672.03 – 677.83. Taking 645.30 away from 677.83, you find you have lost 32.53 points. For your size of stake, this amounts to a loss of £260.24.