A leading packaging business, DS Smith plc is headquartered in Maidenhead, Berkshire, and was founded in 1940. This market sector is subject to variation according to the health of the economy, as more packaging is required when more goods are sold, thus when spread betting you need to keep an eye on general economic conditions as well as those particular to the manufacturing of corrugated packaging and recycled paper.
This weekly price chart gives some idea of the volatility that you can expect when trading. Note particularly that there are two sharp peaks followed by immediate declines, and to anticipate these, you need to stay in touch with the news.
For instance, the company announced the proposed acquisition of the Swedish packaging company, SCA, in January 2012, and you can see the immediate effect of a sharp rise in price followed by a gap downwards. The deal was completed by the end of June, approximately where the MACD crossed over into an uptrend, but you can see that the much greater effect on the share price was at the time of announcement.
With that acquisition, the Group is now the second-largest corrugated packaging manufacturer in Europe, with annual revenues of about £4 billion.
The company was first listed on the London Stock Exchange in 1986, during which year it acquired two other paper manufacturing businesses. During the following years, it made several acquisitions, strengthening its position in the industry, though an earlier acquisition of Spicers, the office products wholesaler, was sold in 2011, producing the first peak that you see on the chart.
The major moves that you see on this weekly price chart were the result of news events, but you can see that there is a reasonable amount of price movement outside of these areas, which presents good opportunities for trading profits.
DS Smith Rolling Daily: How to Spread Bet on DS Smith shares?
Here is an example of a daily rolling bet on DS Smith plc. The daily rolling bet is rolled over automatically by your spread betting company each evening, and there may be a small adjustment charge made to your account each time this happens. The exact amount depends on your spread betting provider and usually it is not significant. The current quote for a rolling daily bet is 214.26 – 215.34.
If you think that the share price will increase, you would place a long or buy bet on the shares. This is at the higher price, 215.34 in this instance. Suppose that you decide to stake £3 per point. If the price goes up to 267.23 – 268.31, for example, you could close the bet and take your winnings. To work out how much you have won, you simply calculate the number of points gained, taking the opening price of 215.34 away from the closing price of 267.23 to get 51.89, then multiply by your stake of £3 to get £155.67.
Some of your spread bets will lose, so you must be prepared to close the bets quickly once you see they are not working out. In this case, perhaps you would have closed the bet when the price went down to 175.92 – 177.0. The closing price, the lower price as this is a long bet, is 175.92, therefore the point difference from the starting price is 215.34 minus 175.92, which is 39.42 points. At £3 per point, your loss is £118.26.
Alternatively, you could use a stop loss order to close a losing bet, as this requires your spread betting provider to watch the market for you and take action as soon as your defined level is reached. You might find the bet closed at 188.21 – 189.29. With a closing price of 188.21, the point difference in this case is 27.13, costing you £81.39.
DS Smith Futures Based Bet
The current price for the quarterly futures bet on the far quarter is 214.83 – 217.42. You might decide from your analysis that the price is going down over the next few weeks, and decide to place a sell bet for £6 per point. If the price goes down to 156.92 – 158.96, and you close the position to collect your winnings, this is how you can work out your profit: –
- The opening price for your short bet was 214.83
- The closing price was 158.96
- Therefore you gained 214.83-158.96 points
- Which works out to 55.87 points
- Your stake was £6 per point
- Therefore you have won 55.87 times £6
- A total of £335.22.
Not all of your bets will win, and you must be prepared to accept your losses and move on. Say instead of going up the price went down after you placed your bet, you might have closed your trade when the price got up to 256.95 – 258.72. Now you can work out your loss: –
- The opening price for your short bet was 214.83
- The closing price was 258.72
- Therefore you lost 258.72 minus 214.83 points
- Which works out to 43.89 points
- Your stake was £6 per point
- Therefore you have lost 43.89 times £6
- A total of £263.34.
Many spread betters decide to use a stop loss order to take care of their losing trades, as this requires the spread betting provider to close the losing bet regardless of whether you are watching the market. In this case, a stoploss order might have closed your bet when the price was 242.13 – 244.65. Here is the calculation: –
- The opening price for your short bet was 214.83
- The closing price was 244.65
- Therefore you lost 244.65 minus 214.83 points
- Which works out to 29.82 points
- Your stake was £6 per point
- Therefore you have lost 29.82 times £6
- Your total loss this time is £178.92.