Guide to Financial Spread Betting on Melrose
Where to Spread Bet on Melrose?
You can spread bet on Melrose with any of the following companies:
Although note that you can also spread bet with other Spread Betting Companies.
Spread Betting on Melrose
If an investor decides to invest in companies like Melrose then one possibility could be spread betting on the Melrose share price.
Looking at a financial spread betting website like FinancialSpreads, as of Friday, they were showing the Melrose Rolling Daily market at 205.9p – 206.4p. As a result, you can spread bet on the Melrose share price:
- Going higher than 206.4p, or
- Going lower than 205.9p
Whilst spread trading on UK equities you trade in Â£x per penny. Therefore, should you decide to risk Â£5 per penny and the Melrose share price moves 22p then that would change your profits (or losses) by Â£110. Â£5 per penny x 22p = Â£110.
Rolling Daily Equities Markets
One important thing to note is that this is a ‘Rolling Daily Market’ and therefore unlike a normal futures market, there is no closing date. If your trade is open at the end of the day, it simply rolls over to the next trading day.
Should your trade roll over, if you are speculating that the market will:
- Increase – then you’ll pay a small overnight financing fee, or
- Decrease – then you’ll usually receive a small credit to your account
For a worked example please see Rolling Daily Spread Betting.
Melrose Rolling Daily Equities Spread Trading Example
So, if we think about the above spread of 205.9p – 206.4p and assume that:
- You have analysed the stock market, and
- You feel that the Melrose share price looks like it will go higher than 206.4p
Then you could buy at 206.4p and risk, for example, Â£15 per penny.
With such a bet you make a profit of Â£15 for every penny that the Melrose shares move above 206.4p. However, such a bet also means that you will make a loss of Â£15 for every penny that the Melrose market goes lower than 206.4p.
Put another way, if you were to buy a spread bet then your P&L is worked out by taking the difference between the final price of the market and the initial price you bought the spread at. You then multiply that difference in price by your stake.
As a result, if after a few hours the stock moved higher then you could consider closing your trade to lock in your profit.
So if the financial spread betting market increased then the spread, set by the spread betting company, might move up to 214.1p – 214.6p. In order to close/settle your position you would sell at 214.1p. Therefore, with the same Â£15 stake you would make:
Profit = (Closing Price – Initial Price) x stake
Profit = (214.1p – 206.4p) x Â£15 per penny stake
Profit = 7.7p x Â£15 per penny stake
Profit = Â£115.50 profit
Financial spread betting on shares can work against you. In the above example, you wanted the share price to increase. However, it could go down.
If the Melrose share price weakened, against your expectations, then you might choose to close your position to limit your losses.
So if the spread pulled back to 197.9p – 198.4p then this means you would close your trade by selling at 197.9p. As a result, your loss would be:
Loss = (Closing Price – Initial Price) x stake
Loss = (197.9p – 206.4p) x Â£15 per penny stake
Loss = -8.5p x Â£15 per penny stake
Loss = -Â£127.50 loss
Note: Melrose Rolling Daily equities market accurate as of 16-Nov-12.
Melrose Spread Betting – More Details
For more information on trading Melrose, also see Melrose Spread Betting.
Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.