The Switzerland Blue Chip, another name for the Swiss Stock Market Index, is not traded as much as what are regarded as the major indices, but provides an interesting alternative in an economy which is determinedly independent from the rest of Europe. The current spread betting quote for a futures based bet is 5844.0 – 5855.0.
If you think that the Swiss SMI is going to go up, you might want to place a long bet for £4 per point. Your bet is placed at 5855.0, and says that you believe the index will go above this level. As you must close the bet at the lower price quoted, you need the index to climb by more than 11 points to make a profit.
Say that the index went up to 5934.5 – 5945.5, and you decided to close your bet and take your winnings. It’s easy to work out how much you won, as you just multiply your stake by the number of points you gained.
For example, your bet closed at 5934.5, and was opened at 5855.0. That means you gained 5934.5 less 5855.0, which is 79.5 points. Multiplying by your stake of £4 per point, you find that you have won £318.
There is a chance that the index went in the opposite direction to the one you wanted. In fact, this happens quite a lot, and you must deal with it by closing your bet and take your loss quickly, before it becomes too great. Say the index dropped to 5826.3 – 5837.3 and you closed your bet.
The calculation now is how much you have lost. Again, you simply have to multiply your stake by the number of points between your opening and closing positions.
Your bet closed at 5826.3, and you put it on it 5855.0. That means you lost 28.7 points. With your stake at £4 per point, your total losses are £114.80.
On the other hand, you might have decided in the first place that the index was going to fall, and placed a short bet, that is a bet that profits when the index goes down. Say the quote was still 5844.0 – 5855.0, and you decided to bet £9 per point on it going down.
If you are right, and the index falls, you might decide to close your bet and collect your winnings when your spread betting company is quoting you 5786.6 – 5797.6. You must calculate the difference in points and multiply that by your stake to see how much you made.
As this was a short bet, the initial index level was 5844.0, and the closing level was 5797.6. That means you have gained 46.4 points, and at a stake of £9 per point you have a total profit of £417.60.
Once again, we must consider that the index might have gone in the wrong direction for your bet. In this case if the index rose you would lose money. Say it went up to 5862.1 – 5873.1. The number of points that you have lost is 5873.1-5844.0, which is 29.1 points. At your stake of £9 per point, you have suffered a £261.90 loss.
How to Spread Bet the Swiss Stock Market Index
The Swiss have always been careful to control their economy, and it is with good reason that they are the bankers of Europe. The Swiss Stock Market Index is an index of the 20 largest companies which are on the Swiss stock exchange, and together they account for about 85% of the value on the exchange, so are representative of the Swiss economy as a whole.
The Swiss Stock Market Index (SMI), which is sometimes also called the Switzerland Blue Chip, suffered in the global economic meltdown but has shown good signs of strength in recent years. In 1988 it was initiated at the value of 1500 points, and it is now hovering around 6000. To outside observers, the Swiss economy appears unbelievably strong. They run a trade surplus, and inflation is at a fraction of a percent per year. The Swiss National Bank has cut interest rates again to discourage investing in the Swiss franc, and current unemployment rate is less than 3%.
Many countries would like to have this sort of record, but this is business as usual for the tightly controlled Swiss economy. Many of the companies listed on the Swiss SMI are familiar in other countries. They include Nestlé, ABB, UBS, Roche, and even Trans-Ocean, the oil rig company which worked in the Gulf of Mexico for BP and was involved in the 2010 oil spill.
One reason that the Swiss have been able to keep control of their economy is their decision to not join in the European common currency, the euro. Recently they have abandoned the idea that they would eventually change over, and have even pegged the Swiss franc to a value of the euro to prevent the strength of the franc causing the exchange rate to continue to slide, which makes it more difficult for Swiss manufacturers to compete internationally as their goods become overpriced.
Despite the amount of control that Switzerland exercises over its finances, the Swiss Stock Market Index has varied wildly over the years, and your trading strategy must take this into account. It reached nearly 10,000 just before the global crash, and with this amount of volatility you may think is a very worthwhile subject for your spread betting, with plenty of opportunity to make a profit.
Indices are not always the easiest instruments to spread bet on, but if you become familiar with the gyrations of the market and ensure that you have a good trading strategy, they can be valuable ways to enhance your trading. The Swiss SMI may be influenced more than some others by government action, because of the determination of the Swiss government to maintain their society and economy. This makes it particularly important that you establish and stick with stop limit positions, avoiding leaving untended bets for fear that a government pronouncement may be felt by the markets.
Subject to the proviso is that you spread bet the Swiss Stock Market Index with a tested and detailed plan, spread trading on the Switzerland Blue Chip can be profitable.