Spread Bet PowerShares QQQ Trust

For a change from spread betting on ordinary stocks and shares, why not try spread betting on PowerShares QQQ Trust? This is an exchange traded fund (ETF), which means it is similar to a mutual fund but can be traded on the stock market and it varies in price throughout the trading day. The QQQ (this is the symbol under which it can be found on the NASDAQ) is based on the NASDAQ 100 index, so most the time it can be expected to hold all the stocks in the index. Sometimes the managers of such a fund will take a shortcut, buying less than 100 different companies on the basis that some in the same market sector tend to track in a similar manner.

The idea is that the investment trust will reflect the price and yield of the NASDAQ 100 index, so the fund manager may from time to time have to rebalance the relative weights of the shares in the fund, in addition to staying on top of changes in the NASDAQ 100 index.

This is an hourly chart of the price, showing the degree of volatility that you may find. As you can see, the MACD has provided some clear signals for an uptrend and a downtrend in the past, though no indicator should be relied upon to work all the time.

Incidentally, you may find it difficult to locate this Trust for spread betting purposes. IG Index, for example, have it listed as “N 100 Tracking Stock – QQQ”. This unit investment trust can always be identified by the initials QQQ, although until recently it used four Q’s as a symbol. As you can see, with the amount of volatility it shows you must be careful to protect your capital, and spread betting on this financial instrument should be undertaken with caution.

PowerShares QQQ Trust, Series 1 Rolling Daily

The current spread betting price for a rolling daily bet on PowerShares QQQ Trust, or N 100 tracking stock, as it is also known, is 6250 – 6259. This ETF reflects ups and downs of the NASDAQ 100. If you think the price is going to increase, you could place a long bet for £2 per point. The price that the bet would go on at is the buying price of 6259.

If you are correct, the price might go up to 6523 – 6532, and you could close your bet and collect your winnings. As it was a long bet, it closes at the lower or selling price of 6523. Therefore you have made 6523 minus 6259, or 264 points. For your stake, that amounts to £528.

Some of the time your bets will not work out, so suppose the price went down to 6046 – 6055. You might be faced with the difficult decision to close your losing bet to make sure that you did not risk losing any more. Your bet went on at 6259, and it closed at 6046. The difference between these is 213 points, which amounts to a loss of £426.

Many spread betters and financial traders use the stoploss order. This order, which is usually put in place when the bet is opened, tells your spread betting provider to close a losing bet if it reaches a certain level. It saves you having to watch the market all day long or risk the price falling further. Perhaps if you had used a stoploss order in this case, the bet would have been closed for you when the price went down to 6103 – 6112. In this case the trade was closed at 6103, down from the opening price of 6259. That amounts to a loss of 6259-6103, which is 156 points. For this wager, that would amount to £312 that you lost.

PowerShares QQQ Trust, Series 1 Futures

When you learn spread betting, you find out that you want to use a futures based bet if you intend to hold your trade open for some weeks or months, as it may save you ongoing charges. The current price for the N 100 Tracking Stock – QQQ, as is sometimes called, is 6259 – 6287 for the far quarter.

Perhaps you decide on a bullish outlook for this ETF which follows the NASDAQ top 100 shares. You might make a wager of £3 per point that the price will go up. Therefore the wager will go on at the buying price, which is 6287.

You may be correct in your prediction, and decide to close your bet when the price gets up to 6486 – 6505. The bet will close at the lower or selling price of 6486. As you have the opening and closing prices, you can work out the difference in points. 6486 less 6287 is 199 points, and multiplying this times £3 you find that you have won £597.

But even the best of traders cannot predict the markets reliably, and the price might have gone down after you placed your bet. Suppose it fell to 6089 – 6112, and you decided that you had to cut your losses and close your losing bet. This time the bet closed at 6089. The difference between 6287 and 6089 is 198 points. Therefore you would have lost £594.

Many traders decide to use the stoploss order, which instructs your spread betting company to close your trade if the losses reach a certain level. Using this, you do not risk the losses running away with you while you are otherwise engaged, and not watching the markets. Say you use a stop loss order, which closes your bet when the price reached 6148 – 6169. Your bet would close at the selling price of 6148. Taking this away from 6287, you have lost 139 points, and that has kept your financial loss down to £417.

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