ICAP is a leading electronic and voice broker, and an information and risk provider. Its volatility makes it attractive for spread betting, particularly as it is involved in turbulent markets such as credit and equity derivatives.
Here is a daily price chart, showing many trends both up and down. ICAP works in the wholesale financial markets, which includes a range of financial products such as interest rates, commodities, Forex, equities, and the aforementioned derivatives. It provides services to financial and corporate clients, not to the retail market.
The Group can trace its origin to the 1970s, with the founding of Garban plc as a division of MAI plc. After several acquisitions and takeovers MAI merged into United News & Media in 1996, and the financial services division was spun off and listed on the London Stock Exchange in 1998 under the original name of Garban plc.
The other part of ICAP came from Intercapital plc, which was founded as Intercapital Private Group Limited in 1986, and changed to simply Intercapital when it was acquired by Exco in 1998. Intercapital merged with Garban in 1999, and became known as ICAP in 2001.
ICAP now operates in more than 32 countries, after further acquisitions such as the US-based Traiana in 2007, and the average transaction volume flowing through ICAP plc is nearly £1 trillion per day.
As you can see from the chart above, ICAP has an active price providing plenty of opportunities for spread trading either up or down. Its price has not recovered to the pre-global economic crisis levels of 2007, but in the longer term appears to be holding steady and trading sideways. One advantage of such an active chart is that trends are clear cut and more tradable than with prices that tend to coast along in a steady fashion.
ICAP Rolling Daily
The financial company ICAP shows good volatility in its share price. The current spread betting quotation for a rolling daily bet is 323.89 – 325.51. Technical analysis is valuable in determining the probable price direction, so that you can place a spread trade. Suppose your analysis suggests that the share is overvalued, and you choose to place a short or sell bet at a price of £5 per point.
If your prediction is proved correct, the price may fall and you might be able to close your trade and take a profit when the quote is 275.63 – 277.35. As it is a sell bet, the starting price is 323.89, the selling price, and the spread bet closes on the new buying price of 277.35. That means you have gained 323.89-277.35 points, which is 46.54 points. With the size of stake you selected, this would give you a win of £232.70.
Given the fickle nature of the financial markets, you will find that often the price goes in the opposite direction to the one that you select. When this happens, you must be careful to limit your losses by closing the bet for a loss, rather than hanging on in hope and losing more than you can afford. Say the price went up to 361.92 – 363.64, and you closed the bet. With a starting price of 323.89 and a closing price of 363.64, you have lost the difference of 39.75 points. As £5 per point, that is a loss of £185.75.
You may consider using a stoploss order to control your losing bets. That way, your losing bets will be closed even if you are not watching the prices. With a stoploss order, this bet might have been closed at 348.76 – 350.23. 350.23 minus 323.89 is 26.34 points, which would mean you would lose £131.70.
ICAP Futures Based Spread Bet
If you intend to hold a spread bet open for more than a few weeks, then you may choose to use a quarterly spread bet, expiring months in the future. The current far quarter price for ICAP is 324.80 – 328.72. With a bullish outlook on the shares, you might choose to stake £6.50 per point at the buying price of 328.72.
For this example, assume that the price of the shares goes up, and that the spread betting quote rises to 373.46 – 377.12. If you decide to take your profit at this time, your spread bet will close at the selling price of 373.46. With an opening price of 328.72 and a selling price of 373.46, you would have gained 44.74 points. As you chose to stake £6.50 per point, that amounts to a win of £280.81.
For the other side of this example, assume that your bet has lost, with the price falling to 289.10 – 292.88. Closing your bet now and accepting your losses means that you have lost 328.72 less 289.10 points, and this works out to 39.62 points. If you multiply this by your stake, you find that you would have lost £257.53.
Closing a losing bet quickly to minimize your loss is one of the keys to successful spread betting. That is one of the reasons that you should consider using a stop loss order on your spread trades. The stoploss order will activate and shut down your losing position as soon as the price reaches a level you set, which means you do not have to be tied to the computer. The stop loss order in this case might have closed the trade at 295.34 – 298.97. The difference between 295.34 and 328.72 is 33.38 points, resulting in a loss of £216.97.