Hiscox Fundamentals

Hiscox is an insurance provider, and an underwriter at Lloyd’s of London. This can be a difficult position, with news events causing rapid changes in the company’s prospects, so if trading the news is what you’re looking for in your spread betting, Hiscox may be worth a look.

Spread Betting Hiscox Stock

Although listed on the London Stock Exchange, Hiscox is incorporated in Bermuda. It operates in various niche areas of insurance, covering company property and casualty insurance, and high net worth individuals.

As an example of how news events can affect its value, you should note that in 2011 Hiscox paid out over $100 billion in claims, including the Australian floods and the Japanese tsunami. You can see from the chart above how the value of the shares dropped dramatically. Even so, there is an overall pattern of growth in the company’s value.

The company can trace its roots back to 1901, and the Roberts agency which was involved with marine insurance at Lloyd’s. Hiscox joined the company in 1938, underwriting non-marine insurance, and the company became Roberts & Hiscox in 1946. Hiscox went on to become chairman of Lloyds in 1967, and his son Robert took over the partnership in 1970 when Hiscox died.

The company expanded in the 80s, and demerged to become simply an underwriter and Lloyds syndicate manager in 1994. It became listed on the main market of the London Stock Exchange in 1997, moving up from the Alternative Investment Market, and opened its Bermuda office in 2005. It has aggressively pursued growth since then.

You can see a reasonable degree of volatility in the weekly price chart above, though as pointed out above it is likely that large moves in price will be triggered by news events, and therefore not be predictable by technical analysis. However, if you can respond quickly and anticipate a market, there is scope for profit.

Hiscox Rolling Daily: How to Spread Bet on Hiscox Shares?

The current spread betting quotation for a rolling daily bet on Hiscox is 479.80 – 482.20. If you see that a major catastrophe is likely to result in substantial insurance payouts from Hiscox, you might be interested in placing a short or sell bet on the share price. Say you staked £4.50 per point.

If you have anticipated the market correctly, you might find that the price drops to 395.65 – 397.05. Sensing that this is as far as it will fall, you may cash in your bet and collect your profits. The starting price of your short bet was 479.80, and your bet closed at the price of 397.05. That means that you gained 479.80 minus 397.05 points, which is 82.75 points. With a stake of £4.50 per point, you would have won £372.37.

As always in financial markets, there are times when prices do not go as you anticipate or expect, so in this instance perhaps the share price would increase. Perhaps Hiscox was not a major underwriter of the disaster. Say the price goes up to 532.30 – 534.70 and you decide to cut your losses by closing your trade. Your bet was placed at a price of 479.80. The bet closed at 534.70. The difference between these is 54.9 points. As you staked £4.50 per point, this amounts to a loss of £247.05.

Many traders and spread betters decide to use a stop loss order to help them control their losses. With a stop loss order they do not have to be watching the market, as the spread betting broker will close the trade at a pre-instructed level. In this case a stop loss order might have closed the losing bet at 521.21 – 523.50. As before the starting price was 479.80, and this time the bet closed at 523.50. With a difference of 43.7 points, your losses in this case would be £196.65.

Hiscox Futures Based Spread Bet

Taking a longer view of the market, futures style spread bets are usually available expiring at the near quarter, the mid-quarter, or the far quarter of the year, which may be up to nine months away. The current quotation for the far quarter bet on Hiscox is 480.97 – 486.77. The futures style bet has no ongoing charges, and can be closed at any time if you need to either to capture your profit or to prevent further losses.

Say you think that Hiscox will be going up in price in a few weeks or months, you could place a buy bet at 486.77, staking perhaps £6.50 per point. If it comes up to expectations, you might find that you are able to close the bet and collect your winnings when the quote is 547.92 – 552.76. With a long or buy bet, the spread bet closes on the lower or selling price which in this case is 547.92. 547.92 minus 486.77 is 61.15 points. Multiplying by your stake of £6.50, your winnings work out to £397.47.

If on the other hand the price falls after you place your long bet, you might choose to close your position and accept the loss when the price drops to 432.33 – 438.07. The starting price is the same, at 486.77, but this time the closing price is 432.33, for a loss of 54.44 points. 54.44 times £6.50 is £353.86, the cost of this bet.

Another way that is popular among spread betters to close a losing bet is to use a stop loss order, as you do not have to be watching the market all the time. If you had a stop loss on this bet, you might find that the bet would be closed for you at 445.06 – 450.34. Taking 445.06 away from the starting price of 486.77, your loss would be 41.71 points, which amounts to £271.12.