Trading Barclays

If you follow the markets at all, you have probably noticed the volatile situation of the banking industry and of Barclays in particular, and wondered if you could use your knowledge to profit through spread betting. Here is a weekly price chart showing how the share price has been performing recently: –

The price fell from about 200 per share to around 160 at the end of June, when details of how Barclays may have manipulated interest rates in order to benefit themselves and their associated traders emerged. This is represented by the long red candle. The situation was drastic enough that the Chief Executive Bob Diamond had to forgo his bonus. But share prices have been improving since then, and even surpassing previous levels, as the seemingly Teflon coated banking industry undergoes another revival.

It is hard to believe in current circumstances that at one stage a few years ago the banking industry was regarded as a staid and steadfast blue-chip investment. Now, as is plain from the two-year chart above, it is as volatile as many of the market sectors which traditionally have been considered risky.

All this is to the good when you are spread betting, just as long as you take care to mitigate your losses and to have your share of bets that are on the right side of the market. There is little doubt that there may be more to come from the banking industry, particularly as they still hold some loans which could be regarded as more risky rather than seeking to liquidate them and perhaps being forced to realize losses which at the moment they can ignore.

It seems that the MACD has been doing a good job of indicating trading opportunities, although it was a little late showing the fall through most of 2011. When spread betting, you should always concentrate on restricting your losses, and if you do this and follow the news and the technical signs you stand a good chance of making a profit.

Barclays Rolling Daily Spreadbet

The banking industry can be an interesting one to spread bet on, particularly as it is subject to fresh “discoveries” from time to time, such as batches of second rate loans, or in Barclays’ case, the accusation of interest rate fixing. The current price for a rolling daily bet on Barclays is 219.13 – 219.67. If you choose to place a bet for £5 per point that the price will go up, the bet would go on at the buying price of 219.67.

Suppose you are right, and the price goes up to a quote of 248.36 – 248.90. You could decide to take your profits at this stage, and you would work them out like this: –

• your bet was placed at 219.67
• your bet closed at 248.36, the selling price
• which means you made 248.36 less 219.67 points
• for a gain of 28.69 points
• with a stake of £5 per point
• your profit is 28.69 times £5, which is £143.45

However, you cannot expect your bets to always work out, and you must be ready to close a losing bet before you lose too much. Say the price dropped to 198.70 – 199.24, and you decided that you needed to cut your losses. With an opening price of 219.67, as before, and a closing price now of 198.70, you have lost 20.97 points. This works out to a financial loss of £104.85.

Another way to close a losing bet which is preferred by many traders is to have a stoploss order, which is placed at the same time the bet is taken out. If you had done this, in this case the bet might have closed earlier at 205.92 – 206.46. You would have lost 219.67-205.92 points, which is 13.75 points, and that would cost you £68.75.

Barclays Futures

Suppose you are interested in spread betting on Barclays’ shares, thinking that the value will go down in the short term, but are not quite sure if it will happen the next week or next month. You may be tempted to spread trade on a futures based bet. The current price for a futures based bet expiring in nine months is 220.13 – 222.89. Perhaps you would stake £3 per point.

Consider first the case when your bet is a winner. Assume that the price goes down to 183.62 – 185.96. You might decide to take your profit, and can work out how much this is quite simply. Your short bet was placed at 220.13, the selling price, and you closed it at 185.96. That means that you have gained 34.17 points, the difference between them. With a stake of £3 per point, your profit is £102.51.

Whenever you place a bet, you must realize that there is a good possibility that it will be a loser, and then you would need to close it quickly to protect your capital from too much loss. If the price went up to a quote of 247.02 – 249.50 and you decided to exit the trade, you can quickly work out how much you have lost. Your opening price was 220.13, as before, and the short bet finished at 249.50. This amounts to a loss of 29.37 points, which at your chosen stake would cost you £88.11.

Many traders use a stop loss order to close their losing bets automatically and quickly. If you had placed one on this bet, you might find that your spread betting provider took you out of the bet when the price had gone up to 238.69 – 240.91. Taking the difference again, this time you have lost 240.91-220.13, which is 20.78 points. With a stoploss order, you have kept your losses down to £62.34.