Royal Dutch Shell PLC, which is often known simply as Shell, is a global oil and gas company with registered offices in London and headquarters in the Hague, Netherlands. It is the fifth-largest company in the world, and the second-largest energy company according to Forbes magazine. In addition to being involved in all aspects of oil and gas production, including exploration, refining, distribution, and marketing, it has an active renewable energy section looking into biofuels, hydrogen, solar, and wind power.
Shell has a primary listing on the London Stock Exchange, and is the largest company on the FTSE at the present time. It also has secondary listings in Amsterdam and New York. The Royal Dutch Shell group was formed in 1907 by a merger between the Royal Dutch Petroleum Company in the Netherlands and the Shell Transport and Trading Company in the UK. It is reported this was done to compete with the dominant petroleum company of the time, Standard Oil in the USA.
One source of confusion is that there are two types of shares listed on the markets, the RDSA and the RDSB. Although the prices track each other, “B” shares are usually a little more valuable. This split was done for tax reasons. “A” shares have a 25% withholding applied to the dividends, in accordance with Dutch law, “B” shares do not, as in accordance with English law the taxes are declared later. It is generally assumed that Dutch investors buy “A” shares, and English investors buy “B”, though this is not compulsory. In return, Shell has to prove that the income used to pay dividends on the B shares is not derived from Dutch operations.
In practice, for spread betting either A or B shares would be okay, as they reflect the same basic company. You are not purchasing any shares when you spread bet, therefore the tax issues do not affect you.
Spread Betting Royal Dutch Shell Rolling Daily
Oil and gas exploration is always a volatile industry, not just because of the constantly changing oil futures prices but also because of the exploratory nature of the market sector. If you are an experienced spread better, then you’ll be better equipped to deal with the fluctuations.
Say that you believe the price of Royal Dutch Shell – these are the B shares shown above – is going to go up. The current quote for a daily rolling bet is 2081.9 – 2086.1. You make a long bet for £3.50 per point.
In a few days you may be proven right, and the price goes up to 2352.6 – 2357.2. You decide to close your spread trade and collect your profit. You opened your bet at a price of 2086.1. Your bet closed at the price of 2352.6. 2352.6 minus 2086.1 is 266.5 points. Multiplying this times the size of your wager, £3.50, means that you have won £932.75.
As things do not always go the way you want, perhaps the price went down instead of up and you are faced with closing the bet to minimize your losses. Perhaps the price goes down to 1882.6 – 1886.8. You opened your bet at the price of 2086.1, as before, but this time the bet closed at 1882.6. That’s a difference of 203.5 points. Multiplying that out, you find you have lost £712.25.
Many traders use stop loss orders to control their losses, as it does not matter if they are watching the market when it falls, their spread betting provider will close the losing bet for them. The stoploss order is usually placed at the same time the bet is opened. In this case, perhaps the stop loss order would have closed the losing bet when the price was 1952.1 – 1956.3. The starting price was 2086.1, and the closing price was 1952.1. The difference is 134.0 points, so at £3.50 per point you would have lost £469.
Royal Dutch Shell Futures Based Bet
Futures based bets are very useful for the trader who looks to the medium-term, considering holding a spread bet open for some weeks or months. The current futures based price for the far quarter is 2091.6 – 2103.6, and this has at least six months until expiration. If you think that the price is going down in that time, you might place a short or sell bet for £2.50 per point, and this would go on at the selling price of 2091.6.
Suppose that you are correct, and that the price falls, then you could close your bet and take your profit when the quote was, say, 1852.5 – 1863.4. Even though this is a futures based bet, you can close it at any time when the price is right. Your bet was placed at 2091.6, and closed at 1863.4. The difference between these is 228.2 points. Multiplying that times £2.50, you find you have won £570.50.
On the other hand, if the price went up after you placed your bet you may be faced with closing a losing position and minimizing your loss. Perhaps the price would go up to 2287.6 – 2298.8, and you would close your trade. Your bet was placed at 2091.6, as before, but this time closed at 2298.8 for a loss. The difference between these two prices is 207.2 points, which at your chosen stake would cost you £518.
As an alternative, you might have issued a stoploss order when you opened the bet. This would close your losing position for you automatically when it reached a level you chose. Perhaps this would close your bet when the price went up to 2215.6 – 2227.4. Working it out, 2227.4-2091.6 is 135.8 points. At £2.50 per point, your loss would be £339.50.