African Barrick Gold Fundamentals
Unlike many other companies, African Barrick Gold has a short, volatile, and interesting history. Its volatility makes it a prime target for the adventurous spread betting, and there are several issues that you need to bear in mind if you are tempted to trade on this security.
The simple story is that African Barrick Gold is a gold mining business, started in the year 2000 in Tanzania. It is quoted on the London Stock Exchange, where it is currently valued at nearly £2 billion.
This weekly price chart shows excellent volatility for those who are experienced enough to profit rather than lose from it.
But there is much more behind the story of African Barrick Gold than the plain facts stated above. Barrick Gold is a Canadian company and the largest gold mining company in the world. As an oil and gas company, it sustained terrible losses and the decision was made to concentrate on gold mining. It went public and was listed on the Toronto Stock Exchange in 1983. It has operations around the world.
African Barrick Gold started as a division of Barrick Gold in 2000. It was floated off as a separate company and first listed on the London Stock Exchange in 2010. It now operates four gold mines in Tanzania, both underground and open pit. Recently China has been taking an interest in the company, and is expected to make a formal takeover offer.
The company has been struggling of late, with third-quarter profits down 72% in 2012 compared to 2011. If you have been watching the news, you will know that African miners have been involved in violent clashes, with strikes and protests and multiple deaths. The track record for Chinese owned African mines is worse than most, so it can be expected that the future is not rosy for the miners. However, if the takeover takes place, it is likely to have a marked effect on the share price, and the mines will finish up being owned by the Chinese National Gold Corporation, a state-owned entity.
African Barrick Gold Rolling Daily: How to Spread Bet on African Barrick Gold shares?
If you want to spread bet on this volatile mining stock, then you must be careful to have a strategy that limits your possible losses. This may even include paying extra (with an increased spread) for a Guaranteed Stop Loss, and you should weigh up the costs against the benefits. The current price for a rolling daily bet on ABD is 422.94 – 425.06.
As an example, consider that your analysis suggests that the price will fall in the next few days. You may place a short or sell bet, staking perhaps £7.50 per point. Now if the price falls to, say, 346.91 – 349.02, you may close your bet and collect your profit. As you placed a sell bet, you started at the lower price of the original quote, 422.94. It closed at 349.02. 422.94 minus 349.02 is 73.92 points. With a wager of £7.50 per point, that means you have won £554.40.
Now consider the other alternative, that the price increased after you placed your short bet. You would need to close your trade for a loss, and you might do that when the quote was 481.65 – 483.87. The starting price is the same, at 422.94, but this time the spread bet closed at 483.87. The difference between these is 60.93 points, so that works out to a loss of £456.98 for your chosen size of stake.
Finally, if you had placed a stop loss order when you took out the bet you might find that the trade would be closed earlier, saving you some money. The stoploss order tells your spread betting provider to close the trade if a certain level of loss is reached, and in this case might have activated and closed the trade when the quote was 465.72 – 467.85. The closing price would be 467.85, so taking away the opening price of 422.94, you find you have lost 44.91 points. Multiplying by £7.50, that amounts to a loss of £336.83.
African Barrick Gold Futures Bet
The price of a quarterly futures spread bet on African Barrick Gold, for the near quarter, is 422.86 – 426.26. You might choose to go short on this price if you think that the price will be going down over the next few weeks or months. Say you bet £5 per point at the selling price of 422.86.
Suppose that the price goes down to 365.76 – 369.20, and you decide to close your bet and collect your winnings. The bet was entered at the price of 422.86, and it closed at the buying price of 369.20. That means that you gained 53.66 points. Multiplying by £5, your total profit is £268.30.
If the price did not go in your favour, and you will find this often happens, you may need to close the losing bet and accept your losses before they become too large. Say they went up to 461.32 – 464.06 and you closed the trade. The closing price this time is 464.06. Taking away the starting price of 422.86, you have lost 41.2 points. For your chosen size of stake that means that you would have lost £206.
A number of traders and spread betters use a stop loss order to deal with unsuccessful bets. The stoploss order requires your spread betting provider to close your losing trade for you, once it reaches the price that you set. The advantage is that you do not need to be watching the markets all the time, as your broker will do this automatically. With a stoploss order you might find that this spread bet was closed at a level of 449.63 – 452.35. Therefore the closing price would be 452.35. 452.35 minus 422.86 is 29.49 points. This works out to a loss of £147.45, saving you some money.