The German 30, or DAX as it is sometimes known, is an index that includes many major companies that are household names. It is competitively priced because of the amount of spread betting it attracts. The current spread prices for it are 5858 – 5860.
DAX 30 (Germany 30): Did you Know?
The DAX is a barometer of the strength of the German economy. It measures the performance of the 30 largest companies in Germany based on order book volume and market capitalisation with the companies constituting the index reviewed quarterly. The market hours fall between 08:00 and 14:30 GMT. The DAX is an index made up of 30 selected German blue chip companies which are traded on the Frankfurt Stock Exchange.
DAX 30 Spread Betting Example
Say you think that the index is going up, you may want to place a spread bet of £5 per point. As you are betting the price is going to rise, this would be placed at the “buy price” of 5860, and you are betting that the index will go above that level.
A little later you notice that the index has indeed risen, and that your spread betting company is quoting 5932 – 5934. The first price is the “selling price”, and that is the price your broker must use close your bet, which you tell him to do.
This is the way you calculate how much you have won with the bet: –
- the starting index was 5860
- the closing index was 5932
- the number of points you gained is the difference, 5932-5860, which is 72
- you staked £5 per point that the index moved
- so the amount you won is 72 times £5, which is £360.
Indices can go down as well as up, and you may have bet the wrong way on the German 30. Say that the price fell to 5835 – 5837, and you decided that you did not want to lose any more so you closed the bet. Again, you must use the first price, 5835 for closing a buy bet.
- The starting index was 5860
- the closing index was 5835
- the number of points that you lost is 5860-5835, which is 25 points
- your stake was still £5 per point
- so the amount that you lost is 25 times £5, which is £125.
As an alternative spread bet, you decide to take a futures based bet on the German 30, with a closing date some months in the future. You can still close this bet any time you want, and you will see that the spread between the buying and selling prices is often larger than for the daily bet. On the other hand, you won’t be charged a minimal amount of interest each day, as you are with the rolling daily bet.
Your spread betting broker is currently quoting 5868.8 – 5874.8, and you decide to take a long bet for £18 per point at a price of 5874.8.
After a few weeks the price has gone up to 5903.6 – 5909.6, and you decide to close the bet and collect your winnings. The bet closes at 5903.6.
- The number of points you have gained is 5903.6-5874.8 which equals 28.8 points
- at the stake of £18 per point, this means you won £518.40.
You must always be careful to protect yourself from large losses, and if the index had instead gone down you might have decided to close the bet early at a level of 5844.3 – 5850.3.
- The number of points you have lost is 5874.8-5844.3, which is 30.5
- 30.5 times £18 means you have lost £549.
How to Spread Bet the German 30
The German 30 is an index of the 30 largest German companies that are traded on the stock exchange in Frankfurt. Arguably, it’s one of the most important indices in Europe, with Germany being one of the strongest economic forces in this region.
This index is also sometimes referred to as the DAX, or as the DAX 30. DAX stands for Deutscher Aktien IndeX, changed more recently to Deutscher Aktien Xchange. It was set up with a base value of 1000 in 1988, and the 30 largest companies included in the index account for about 75% of the value of the Frankfurt Stock Exchange.
As these companies are so large, the chances are that you have heard of a number of them. They include car companies such as BMW and Volkswagen, and others such as Adidas and Siemens. They are selected as the largest 30 companies in terms of market capitalization and order book volume, and the list is reviewed regularly, every quarter. The weightings of the companies are figured out using a free float methodology, which basically means looking at the actual number of shares available for sale, excluding any held by governments or other promoters. Other rules include that the companies may be dropped if they’re no longer in the top 45 largest companies, or new companies may be added if they get to as high as the top 25.
The DAX index itself is updated even after the market closes, by using futures prices for the next day, so you may see some changes after hours.
Looking at the composition of the list, Siemens is clearly the largest, and the only company accounts for more than 10% of the index. BASF is next, with Allianz insurance, Bayer chemicals, Daimler autos, E.ON utilities and SAP software the only other ones that amount to more than 5% of the German 30 index.
So it is likely that you already have a good idea how many of the companies are performing, and can therefore see whether the overall trend of the index will be up or down. Your spread betting provider may offer several futures based bets which would be suitable for you to place a wager on. But in the short run, the German 30 can be as volatile as any other index, and so it is essential that you have a well-developed trading plan before undertaking much betting on it.
Included in the plan you need a sound stop loss strategy, and you should make sure that you adhere to it, and have it in place as soon as you take out your bet. It is not always necessary to put your stop loss in the market, but if you think you’re likely to be distracted while trading then it is probably a good idea.
As an alternative to the perceived major indices of the FTSE and the US markets, the German 30 has the benefit of being familiar yet different, giving you extra opportunities for profiting from your spread betting exploits.