If you have any geek in you, you will have heard of Seagate Technology. It is an American company well known for its hard disk drives, and as a technology company, can be volatile and thus well worth spread betting on. Seagate started life as Shugart Technology in 1978, though it rapidly changed name to avoid confusion with another company. It is incorporated in Ireland now, though for a while it was incorporated in the Cayman’s for tax reasons. Even so, the head office is in California and the company is quoted on the NASDAQ exchange.
Seagate was responsible for developing the first 5.25″ hard drive in 1980, which could be fitted into the same space as the 5.25″ floppy disk drive. As a major supplier to IBM in the 1980s, Seagate expanded rapidly with the growing market for the personal computer.
This weekly price chart shows exactly why technology shares can be both a source of profit and of frustration for the spread better. Because of the volatility, if you are a beginner at trading it may be better to avoid this company. The industry is competitive, and news statements can rapidly change the direction of the share price.
Nonetheless, Seagate continues to impress, staying at the forefront of the technology with a 4 TB hard drive recently announced. Sales projections have been lowered in 2012, but the outlook is still good while the global economies continue to recover. In a similar way to the manner in which Hoover has become synonymous with vacuum cleaner, Seagate is for many people synonymous with hard drive, due in part by Seagate’s strategic acquisition of competitors over the years.
If you are tempted to spread bet on the price of Seagate Technology, then you should bear the evidence of the chart above in mind, and make sure that you are careful to make and keep stop loss positions to avoid any drastic losses.
Seagate Technology Rolling Daily
The rolling daily prices for spread betting on Seagate Technology are currently 2532 – 2538. This means that if you want to open a position, wagering that the price will go up, it will be placed at 2538. Say you did this, betting £3 per point.
If you are right, and the price goes up, you might find that you are able to close the bet and take your profit when it reaches 2652 – 2658. Your bet would close at 2652, and that would give you a gain of 2652 minus 2538 points, which is 114 points. With a bet of £3 per point, that amounts to a profit of £342. Depending how long you held the bet, you might find that your account had been charged a little when the bet is rolled over each night, but usually this is not large.
Of course, nothing is sure with the stock market, and you might find that the price went down as soon as you placed the bet. Say it went down to 2463 – 2469, and you decide to close the bet and accept your loss. This time, your bet opened at 2538 as before, but it closed at 2463. The difference in points is 75, which multiplied by £3 means you lost £225.
Many spread betters use stop loss orders to close out their losing trades. This means that they do not have to follow the market all day long, and also means that the position is closed speedily if the price goes against them. Say in this case you had placed a stop loss order when you opened the bet, and the price fell. You might find that the order closed your bet for you at the selling price of 2502. Your bet opened at 2538, and closed at 2502, giving you a loss of 36 points. With the stoploss order, you have lost £108.
Seagate Technology Futures
Those spread betters who look to the midterm markets sometimes use the futures based pricing. As it usually has a larger spread between the buying and selling prices, for example Seagate Technology is quoted at 2532 – 2555, a spread of 23 points, it can cost more in the short term than the rolling daily bets. The advantage is that there is no charge made for a rollover, and you can hold the bet open without cost up until the expiration date.
If you thought that Seagate Technology was going to go down in the next few weeks or months, you might place a sell bet for £2.50 per point at the price of 2532. If you are correct, you could close your bet when the price goes down to 2386 – 2403. Working out how much you have made, the opening price was 2532 and the closing price was 2403. The difference is 129 points. That is a total gain of £322.50.
But suppose, as frequently happens, the price goes in the opposite direction to the one you want. You might find that you have to close the position when the price goes up to 2628 – 2647. Looking at how much you have lost, the point count is 2647 minus 2532, or 115 points. That amounts to a loss of £287.50.
If you do not have the time to follow the markets through the day, or are scared that you will miss the price going against you, and suffer a big loss, you might want to place a stop loss order when you open your bet. If you had done that in this case, possibly your losses would have been less. You can set the stop loss order at the level you want, though the exact price that the bet is closed is not guaranteed, unless specifically requested. Said that your bet was closed at 2586 – 2597. This time you have lost 2597 minus 2532, which is 65 points. Your losses have been kept down to £162.50.