Barratt Developments is one of the largest housing developers in the UK. It offers a reasonable opportunity for spread betting, although the current stock prices are well below their peak before the housing crash, as you can see below in the monthly price chart.
This chart disguises the fact that Barratt is actually in a decent uptrend at the time of writing. The company was originally founded in 1958 under the builder’s name, Greensitt, but a few years later Barratt, an accountant, was included in the name, and the original flotation on the stock market was in 1968. Greensitt left the company, which was then simply known as Barratt Developments. Shortly after this, the company embarked on a series of acquisitions which raised it from a local housebuilder to a national company which built about 10,000 homes a year.
Just after Barratt achieved a record 16,500 houses in 1983, it was featured in two television programmes which criticized timber framed housing and starter homes. This set it back for many years.
Barratt has concentrated on the trade-up market, and has several upmarket brands. It even has a commercial division called Wilson Bowden Developments, and is currently performing well for its investors. Within the last few months, the company has grown from about 130 per share up to the 190′s.
The daily chart shows regular retracements in the uptrend, rather than a steady growth as it may seem on the chart above. This is to be expected, and is the normal course of a trending stock. The depth of each retracement can be anticipated by looking at the Fibonacci levels, and the stock has been performing predictably in accord with these guidelines. Generally you can expect retracements to be 38%, 50%, or at most 62% of the most recent uptrend. Any retracement that is more than 62% is most likely an indication that the trend is reversing.
Barratt Developments Rolling Daily: How to Spread Bet on Barratt Developments Shares?
You may believe that the share price of Barratt Developments is going to increase over the next few days, and want to place a long bet on it. Looking up the shares with your spread betting provider, you may find that they are currently listed at 188.43 – 189.37 for a rolling spreadbet. Say you decide to risk £5 per point on this bet.
Over the course of the next few days, you may see some slight adjustments applied to your account each evening when the bet is rolled over. But after a time you may be looking at a price of 246.93 – 247.87, and decided to cash in your bet. Your bet was placed at a price of 189.37, and you chose to close it when the price was 246.93. That means you made 246.93 minus 189.37 points, which is 57.56 points. If you multiply that by £5, you find that you have won £287.80.
Of course, the price can go down as well as up, and no one can say with certainty which it will do. If the price went down to 145.22 – 146.16, you might decide to cut your losses and close your bet before the price went any lower. This time the bet would close at 145.22. Taking that away from the starting price of 189.37, you would have suffered a loss of 44.15 points, and that would cost you £220.75.
It is often a good idea to place a stop loss order when you take out your spread bet. This requires your spread betting provider to close your losing bet if it reaches a level that you set, and you do not have to spend your time watching the market. Say with a stop loss order this bet would have been closed at 156.42 – 157.35. Your loss now is 189.37 less 156.42, which is 32.95 points. Multiplying by your stake, your bet has cost you £164.75.
Barratt Developments Quarterly Futures Bet
To take a slightly longer view of the trading market, you might choose a futures style spread bet. That way, there would be no adjustments applied to your account for a rollover, and you could hold your bet open until the expiration date if you wished. The current quotation for a far quarter spread bet on Barratt Developments is 188.84 – 191.12.
Say you believe that the price will go up over the next few weeks or months, you might place a buy bet for £7.50 per point. The far quarter spread bet expires in about eight months time, but you can close your bet any time you want to, to take your profits, to cut your losses, or simply because it is not performing as you had hoped.
If your spread bet works out, you may find that you are able to collect your profits when the price goes up to 249.63 – 251.75. The starting price was 191.12, and the closing price was 249.63, giving you a point profit of 58.51. With a wager of £7.50 per point, that is equal to £438.82.
You must also consider the other possibility, that your bet might be a loser. You could decide that you have had enough when the price drops to 146.72 – 148.90. Closing your trade at this time, you would have lost 191.12 minus 146.72 points, which is 44.40 points. Multiplying by £7.50, your loss is £333.
Many spread traders decide that it is worth using a stop loss order, which keeps an eye on the progress of your bet even when you cannot. If the bet becomes too much of a loser, your spread betting provider will close the trade for you. With a stop loss order, you might find that the trade would have closed at 159.94 – 161.73. This time your loss would be 191.12 less 159.94, 31.18 points, which works out to £233.85.