So crude oil prices are rocketing and Shell has reported handsome Q1 2008 profits but with Q2 oil prices also looking high…how to spread bet on Shell?

How to Spread Bet on Shell Shares?

The current price of the Royal Dutch Shell (September ‘A’) market value is 2054.6p - 2062.2p with FinancialSpreads.com. This market expires on 16-Sep-08. Therefore you can spread bet on Shell shares settling:

Higher than 2062.2p, or
Lower than 2054.6p

On the expiry date for this ‘September’ futures market, 16-Sep-08.

When spread trading FTSE 100 equities, you trade in £x per penny, where a penny in this case, is 1p of Shell share price movement. Eg if your stake was £4 per penny and the Shell shares move 11p then that would be a £44 difference to your profit (or loss!).

Worked Spread Betting Example

So taking the above spread of 2054.6p - 2062.2p let’s say that you think the Shell shares will close above 2062.2p on 16-Sep-08.

Therefore you could buy at 2062.2p for a stake of, let’s say, £2 per penny.

When ‘Buying’ a spread bet your profit / loss is worked out by taking the difference between the final price of the market and the price you made the spread bet at. You then multiply that by the stake per penny.

If on the settlement date the market closes at 2121p, then:

Your profit / loss = (2121.0p - 2062.2p) x £2 per penny stake.

= 58.8p x £2 per penny stake.

= £117.60 profit.

But if the market did not work out as expected and had the Shell shares closed down at 1989p, then you would have lost money on your investment.

Your profit / loss = (1989.0p - 2062.2p) x £2 per penny stake.

Loss = -73.2p x £2 per penny stake.

= -£146.40 loss.

Notes:

i) spread betting markets quoted as of 30-Apr-08
ii) There are two classes of Shell shares, Shell (A) and Shell (B). For more details on spread betting on Shell (A) or Shell (B) or for details about the classes of shares go to: Shell Spread Betting.

Good luck!

DB

Clean Financial - Spread Betting