A belated Happy New Year!

As promised on this blog we will try to mix things up and today we’ll have a quick look at one of the so called recession proof industries. Cigarettes are often seen as ‘relatively recession proof’ and therefore during ‘interesting times’ traders often have a quick look at the Tobacco companies to see if there’s any value there.

Today we’ll have a quick look at buying Imperial Tobacco shares.

How to Spread Bet on Imperial Tobacco Shares?

As with many financial markets, you can bet on the future price of shares, like Imperial Tobacco shares, rising or falling.

As it stands, the Imperial Tobacco (June) market is 2612.0p - 2624.4p with Financial Spreads. This ‘June’ market expires on 17-Jun-08.

Therefore you can spread trade on Imperial Tobacco shares settling:

  • Higher than 2624.4p, or
  • Lower than 2612.0p

By the expiry date for this market, 17-Jun-08.With UK equities spread trading, you trade in £x per penny, where a penny is 1p of Imperial Tobacco share price movement.

Eg if your stake was £4 per penny and the Imperial Tobacco shares move 20p then that would be a £80 difference to your profits.

Spread Betting Example

So taking the above spread of 2612.0p - 2624.4p let’s say you have done your market analysis and think that the Imperial Tobacco shares will be higher than 2624.4p by on-Jun-08.

Therefore you buy at 2624.4p for a stake of, let’s say, £2 per penny.

And so let’s say that by the settlement date the shares close at 2683p.

If so, your profit / loss is worked out by taking the difference between the settlement price of 2683p and the value you bought at, ie 2624.4p and then multiplying that by the stake per penny of share price movement.

Profit and loss = (2683.0p - 2624.4p) x £2 per penny stake.

Profit and loss = 58.6p x £2 per penny.

= £117.20 profit.

Nevertheless if the market didn’t move as predicted and had Imperial Tobacco shares gone against you and finished at a lower than expected level of 2498.0p, you would have made a loss on this spread bet.

Profit and loss = (2498.0p - 2624.4p) x £2 per penny stake.

Profit and loss = -126.4p x £2 per penny stake.

= -£252.80 loss.

That’s it for now.

Good Luck.

DB.

Clean Financial - Spread Betting