Debenhams (DEB) is a major British retailer with a more department stores than any other store group. The price chart below shows that it is a relatively quiet stock, suitable for spread betting by novices
Although Debenhams has been around as long as anyone can remember, most people are not aware that it started as long ago as 1778. It was first known as Flint & Clark, after the founders, but in 1813 William Debenham became a partner and the name changed to Clark and Debenham. The business finally became known simply as Debenhams in 1905.
The 20th century saw Debenhams acquiring many department stores in towns and cities in the UK, including Harvey Nichols in Knightsbridge. It was listed on the London Stock Exchange in 1928. Acquired by the Burton Group in 1985, for a few years its individual listings disappeared, but it de-merged in 1998 and became a separate listing again.
Debenhams has had some issues over the years. In the 1980s it was targeted by the Animal Liberation Front because of the sale of animal furs, and it suffered fire-bombing. However, it did stop selling furs.
The £1.5 billion cap is taking on a multi-faceted approach to spread its wings and reduce risk. The company owns 167 stores in the UK and Republic of Ireland, and also has 61 franchised stores in other countries in Europe, Africa, and Asia. One of its most recent stores is in Karachi, Pakistan, opened in mid-2012
The clothing, beauty and home products retailer is presently facing increasing competition and may need to cut costs which may continue pressuring margins. The department store online based operations are operating and growing well but the company’s bricks and mortar shops are still struggling. Cold weather conditons subdued sales in the early part of 2013 while the summer heat also seems to have hit demand for the brand’s fashion ranges. Unlike Burberry which targets itself to the high end of the market or Primark which appeals to the low end, Debenhams doesn’t fit either class which may leave it on the defensive front.
The share price fell long and hard during the global economic crisis, from a high of around 200 to a low of 20, and it has been hovering between 60 and 80 for several years. However in 2012 it has started an upward trend, and as you can see above has topped 120. With relatively low volatility, spread betting on these shares should be relatively kind to the beginner, despite a couple of gap opens evident above.
Debenhams Rolling Daily: How to Spread Bet on Debenhams Shares?
With its recent stalling of an uptrend, you may decide that Debenhams is worth shorting, looking for a reduction in share price. The current rolling daily quotation is 115.71 – 116.29. Say you decide to wager £15 per point on a sell bet.
First, consider the case when the price goes down, as you have bet, giving you a win. Perhaps you might decide to cash in your bet when the price went down to 90.84 – 91.42. The starting price is 115.71. You closed your bet at 91.42. Therefore you have made the difference of 115.71 minus 91.42, which is 24.29 points. Multiplying this by your bet size of £15, your total profit works out to £364.35.
You also have to consider the case when the price goes up, causing you a loss. It is important when you trade to know when to take your losses and move on, as keeping the size of your losses down is one of the keys to successful spread betting. Suppose you decided to close your bet when the price went up to 130.63 – 131.21. With the same opening price of 115.71, this time the bet closed at 131.21. That means you have lost the difference which is 15.50 points. 15.50 times £15 works out to a total loss of £232.50.
Many spread betters decide to use a stop loss order to help them minimize the cost of their losing trades. The moment the price goes beyond a certain level, your spread betting provider will close the trade for you, saving you the problem of watching the share price all day long. With a stop loss order, this trade might have closed at a price of 125.66 – 126.24. The closing price this time is 126.24, so taking away 115.71 you have a loss of 10.53 points. For your chosen size of wager, that works out to a loss of £157.95.
Debenhams Futures Style Bet
Taking a medium-term view, you might choose to place a long bet on the far quarter futures spread bet. This is currently quoted at 116.16 – 117.56, so having worked out your finances you decide to stake £10 per point.
If your bet works out, you might find that the price goes up to 153.47 – 154.87 and you can close your bet for a profit. Your bet was placed at the buying price of 117.56, and it was closed at the selling price of 153.47. That means you have gained 153.47 minus 117.56 points, which is 35.91 points. With a stake of £10 per point, your profit works out to £359.10.
On the other hand, the price might have gone down after you placed your bet, and you would need to cut your losses and close the trade before it went too far. Perhaps you closed your spread bet when the quote goes down to 96.26 – 97.66. The same starting price of 117.56 still applies, but this time your closing price was 96.26. The difference is 21.30 points, which for a £10 stake works out to £213.
Though this is a futures style bet, and therefore does not expire for several months, you should remember that you can close it at any time if the losses are mounting, or if you think that you have achieved as much gain as possible. If you set a stop loss order when you take out the bet, your spread betting provider will close the bet for you if it reaches a certain level of loss. Perhaps this would trigger and close the bet at 103.73 – 105.13, to give you a closing price of 103.73 on this trade. Taking this away from the opening price of 117.56, with a stop loss order you would have lost 13.84 points. This would amount to £138.40.