De La Rue plc is an interesting company as a glance at its history will attest. Its stock price has been going through cycles in the past few years, giving spread betting enthusiasts opportunities.
De La Rue is in the security printing, paper making, and cash handling systems business. It can trace its history back to Thomas de la Rue who founded a printing company in London in 1821. He gained a Royal Warrant to produce playing cards 10 years later, started printing postage stamps in 1855, 15 years after they were invented, and produced banknotes from 1860.
The business started as a family partnership, but in 1896 converted to a private company. The family sold their interests in 1921, and the company went public on the London Stock Exchange in 1947. The shortened form of the name, De La Rue, was adopted in 1991.
The focus now is on producing banknotes on high-security paper, and the company boasts the business of more than 150 national currencies, reputedly being the largest such company in the world. This side of the business also includes producing other secure documents such as passports, travellers’ checks, and driving licences. De La Rue also makes holograms, such as you have on credit cards and bank notes.
The other side of the business is a range of cash handling machines, such as banknote counters and sorters. Most of this business was sold off in a management buyout in 2008.
The playing card business was sold to Waddington’s in 1969.
You can see from the daily price chart above that the cyclical tendencies of the stock price last for several weeks, which would tend to make a daily trend following system worthwhile. The exceptional dip, early November, appears to have been triggered by an announcement that a number of orders planned for production had been delayed to the following year. Even though the company announced that results would be similar to the previous year, you can see the affect that such an announcement has on the market.
De La Rue Rolling Daily
In the cycle of things, perhaps you believe that De La Rue’s shares are going to reduce in value in the next few days. In that case, you may choose to place a short or sell bet, staking perhaps £8 per point. The current quotation for a daily rolling bet is 912.7 – 917.3.
Assuming that you are correct and the price goes down, you may find yourself in a position to cash in and collect your profits when the quote reaches 882.1 – 886.7. Here is how you can calculate your winnings: –
- Your short bet was placed at 912.7
- Your bet closed at 886.7
- That means you gained 912.7 minus 886.7 points
- This works out to 26.0 points
- You chose to stake £8 per point
- Therefore you won 26.0 times £8
- Your profit is £208
It may be the price went up after you placed your bet. Say you are able to close your bet and cut your losses when the quote reaches 928.0 – 932.6. You can calculate your losses in a similar manner to your winnings: –
- Your short bet was placed at 912.7
- Your bet closed at 932.6
- That means you lost 932.6 minus 912.7 points
- This works out to 19.9 points
- You chose to stake £8 per point
- Therefore you lost 19.9 times £8
- You lost a total of £159.20
If you had decided to place a stop loss order on this bet, you might have found that your losses would be less, as the position would be closed as soon as your chosen loss level was reached. Perhaps a stoploss order would have closed your position at 921.88 – 926.48.
- Your short bet was placed at 912.7
- Your bet closed at 926.48
- That means you lost 926.48 minus 912.7 points
- This works out to 13.78 points
- You chose to stake £8 per point
- Therefore you lost 13.78 times £8
- You lost a total of £110.24
De La Rue Quarterly Futures
With a futures style bet, your account is never charged rollover charges, and you can leave the bet open until the expiration date. Usually there is a choice of three expiration dates, the near quarter, the mid-quarter, and the far quarter. The current quotation for a far quarter bet is 916.0 – 927.1. If you are bullish on this stock in the medium-term, you might choose a long position, buying at 927.1 for £5 per point.
Say you are right, and the price goes up, perhaps to 961.9 – 973.0. Closing your spread bet at this time, you can work out how much you have won. Your bet was placed at 927.1. You closed your bet at 961.9. That means you made 961.9 minus 927.1 points. This works out to 34.8 points. Multiplying by your stake of £5, your profit works out to £174.
When you’re trading on the financial markets you will have your share of losses. To be profitable overall, you must work hard to keep the size of your losses down. Say the price went down to 900.7 – 911.8, and you closed the trade to cut your losses. From your opening price of 927.1, the price has gone down to 900.7, a difference of 26.4 points. That means you would have lost 26.4 times £5, which is £132.
Many spread traders rely on a stop loss order to take them out of a losing trade. It is easier than watching the market yourself, because when a certain price level that you set is reached, your spread betting provider will close the bet for you. In this case a stop loss order might have closed your trade at 906.82 – 917.92. With an opening price of 927.1 and the closing price of 906.82, you have lost a total of 20.28 points. For your stake of £5 per point, that amounts to a loss of £101.40.