One of the smaller stock market indices that you can try spread betting on is the Irish Stock Market Index. It is usually the top 20 index that is offered by spread betting providers, and it is also known as the Ireland Top 20 and the ISEQ20.
The current quote for this index is 423.10 – 424.60. You decide to place an up bet, betting that the index will increase in value. You stake £15 per point, and your starting price for the index is 424.60, the “buy” price.
After a little while, the index has risen to a level of 441.20 – 442.70, and you decide to take your profit. The way you work out your winnings is as follows –
Your bet closes at a level of 441.20, which is the “selling” price, as you placed an up or long bet. Therefore, the number of points that you gained is 441.20 less 424.60, which works out to 16.6 points.
You staked £15 per point, so multiplying that out you got a total profit of £249.
No matter how good your selection process, some of the bets you make are going to lose. Say that instead of going up, the index went down to a level of 418.30 – 419.80, and you decided to cut your losses before they ran away with you. You can figure out how much you lost in the same way –
Your bet closes at the selling price of 418.30. The total number of points you lost is 424.60 less 418.30, which is 6.3 points. At the stake you chose, you have lost 6.3 times £15, which is £94.50.
It may be that you originally thought that the index will go down, and fortunately with spread betting it is a simple matter to make a down bet. The original quotation was 423.10 – 424.60, and you decided to bet £22 on the index going down. For a bet in this direction you use the selling price, which is 423.10.
If you are right and the index goes down, you may choose to close your bet and collect your winnings when the quotation is 398.00 – 399.50. Your bet will close at the buying price of 399.50. That means that the number of points that you have gained on your bet is 423.10-399.50, which is 23.6 points.
Your stake was £22 per point, and multiplying that out you find that you have won £519.20.
Once again you must always consider that the index could go in the wrong way for you, and be prepared to take a loss by closing the bet before it moves too far. Say it moves to 431.10 – 432.60, and you make the choice of accepting the loss before it gets any greater. Once again, a down bet closes at the higher price, which in this case is 432.60.
The number of points you have lost is 432.60-423.10, and that is 9.5 points. As you staked £22 per point, you multiply this out and find that you have lost £209.
How to Spread Bet the Irish Stock Market Index
Why would you want to spread bet the Irish Stock Market Index? There are a few reasons, particularly if you are an independent thinker and do not need to depend on others to tell you what to do. You will not find as much detailed analysis of the Irish markets as you do of many other indices, such as the US, UK, and major European ones.
First, you may need to see what Irish indices your spread betting company will provide for you to bet on. The Irish Stock Exchange Overall Index is currently running at a value of about 2600, but you’re more likely to see a value down in the 400s, which is the 20 share index. This is also sometimes known as the ISEQ 20, which stands for Irish Stock Exchange Quotient.
This is a fairly recent index, established and set to a nominal value of 1000 at the end of 2004. The Irish stock exchange actually dates back much further to 1793, but has usually been in the shadow of the nearby London Stock Exchange with which it merged for a period of the 20th century, although it is now independently running on an electronic trading platform. The companies included are decided by a panel, but in general comprise the 20 largest companies based on trading volume and market capitalization, or market value.
The economic problems in Ireland of recent years are reflected in the current value of the Irish Stock Market Index, as you can see, with it being less than half the value assigned to it a few years ago when it was founded. Financial institutions used to be a sizable part of the index, but now have taken a much smaller share. The major constituents are CRH which sells building materials, Ryanair the budget airline, Kerry Group the food suppliers, and Elan which is a major drugs firm headquartered in Dublin. Typically, several of the companies are also quoted on exchanges in other countries.
An influence on the ISEQ20 is the fact that, unlike the UK, Ireland chose to adopt the euro as its currency when it was given the chance in the European Community. This can be both a strength and a weakness, but in recent years has seemed to be more inclined to the latter. However, being part of the community may have caused more sympathy towards and support of the Irish financial troubles lately.
You should approach spread betting the Irish Stock Market Index by firstly following it for a couple of weeks, and seeing how it tends to move. Are there certain days of the week when you should expect a particular direction in the price? What international news seems to have an effect on the index? And how much volatility can you reasonably expect? This last question is particularly important when you are considering the size of bet that you will be placing. Protecting your capital should be uppermost in your mind, and you can do this by initially limiting your stake while you get used to the movement of the prices.