Let’s say that you are keen to place a bet on Fiat, which has a current quote of 348.45 – 349.15. That is a spread of 0.7 on the daily rolling bet, and the spread can reach as much as 4.23 with this provider for a futures style bet. As you only want to look at the short term, you place a long (up) bet on the rolling daily quote at £7.20 per point. You are betting that the price goes above 349.15.
Say that the quote from your spread betting company goes up to 367.56 – 368.26, and you decide it’s time to take your winnings. You can work out how much you made by simply multiplying your stake and the points gained, remembering that with a long bet the lower price is the closing value. It works out like this: –
Your bet was placed at 349.15. The bet closed at 367.56. That means that you gained 367.56 minus 349.15 points, that’s 18.41 points. As you placed a bet of £7.20 per point, you multiply 18.41 times £7.20 to get £132.55.
You must always consider that your bet may not make you money, and the price may go in the wrong direction. Perhaps the quote from your spread betting company goes down to 336.2 – 336.9. You can work out how much you lost in exactly the same way. Your bet was placed at 349.15 and closed at 336.2, meaning that you lost 12.95 points. The amount you bet was £7.20 per point, which means you lost £93.24.
Considering the other major company on the Italian stock market, the current quote for ENI is 1465.5 – 1468.5. Suppose in this case you felt that the stock was overvalued and due for a correction, you might sell or go short on this company with a stake of £4.50 per point.
Again we’ll consider both winning and losing this bet. Firstly, perhaps the price will fall to 1386.2 – 1389.2, and you decide to close the bet for a win. Your bet was opened at 1465.5, and closed at 1389.2, as it was a bet for the price to go down. That means that you made a total of 76.3 points. If you work that out, for your bet size you won £343.35.
But you can also lose this bet if the price increases after you place it. Say it went up to 1482.6 – 1485.6, and you decided that you needed to cut your losses before it got any higher, so you closed your bet. The bet went on at 1465.5, as before, and closed at 1485.6, the selling price. The difference between these two is 20.1 points. Your stake is the same as before, £4.50 per point, which means that you lost a total of £90.45.
For each company in the examples above the amount you would have won was more than the amount you lost when the bet went bad. It is important that you always have a favourable risk/return ratio, where your winnings will be larger than your losses, as then you can even lose as often as you win and still make a profit.
How to Spread Bet Italian Shares
By their nature, Italians are reckoned to be hot-blooded. Therefore, you might expect that spread betting on the Italian shares would be an exciting exploit. Of course, it’s now possible to trade on the market movements without messing with Euros or even the language, thanks to your spread betting company.
At the time of writing, Europe and the Common Market’s future are hanging in the balance, and Italy is next in the firing line after Greece. But to some extent, this is just a continuation of irrationality and power struggles which seem to have plagued Europe at various times. As pointed out above, it really doesn’t matter to us whether the problems are transitory or have a deeper substance, as long as they produce market moves from which we can profit.
The vehicle manufacturer Fiat, which merged with the Chrysler Group from the USA, is still Italy’s largest employer, and a major influence on the economy. But the Italian oil company Eni is also massive, and only slightly smaller than ConocoPhillips, the US giant. Eni may be the largest oil company that you have never heard of, as it has concentrated on Iraq and South America for its resources.
In general, though, the Italian Stock Market, which is located in Milan, and like many is partnered with the London Stock Exchange, is very small. Currently there are about 300 different companies listed. This means that if you are interested in spread betting in the Italian stock market, you have fewer companies to pick from and learn about when making your selections.
So if you want to spread bet Italian shares, the first thing you should do, after making sure that your spread betting company offers you this option, is to start looking at the companies comprising the market. At 300+, you will find many to choose from, and you should either pick some with which you have some familiarity, or do the research on the ones you find, so that you are not just guessing. Use whatever charting facilities your software provides to get a feel for the way that the share prices move, and pay particular attention to the volatility and the response to standard indicators and oscillators.
The next step is to form a plan, a trading plan or strategy which is appropriate for the security that you are researching. This is key to your profitability, so you must take your time and take care when doing this, checking and back testing your ideas until you find some that have an acceptable level of success. In this respect, you should not spend too much time trying to optimise your ideas, but merely enough to satisfy your needs. “Analysis paralysis”, where you just need to make one more refinement all the time, is one of the blocks to getting on with spread trading. You will find more meaningful improvements to make as you go through the spread betting process, and experience will guide you. Take care to protect your capital, and take calculated risks, and you should show a profit.