Trading Lloyds Banking Group

Lloyds Banking Group is the latest incarnation of the UK banking conglomerate, and ranks as the largest ever bank in the UK. Spread betting on Lloyds is therefore typical of the banking industry as a whole. Lloyds Bank was one of the oldest banks in the UK, having been founded in the 18th century. During the 20th century and on into the 21st, there have been many amalgamations and takeovers, which culminated at present in the Lloyds Banking Group.

In 1995, Lloyds and TSB (standing for Trustee Savings Bank) merged, and acquired the mutual company, Scottish Widows in 2000, which expanded their products in life insurance and pensions. The other major acquisition was HBOS, completed in 2009, though there were several other mergers and acquisitions during the last couple of decades.

In common with the rest of the banking industry, Lloyds Banking Group was hit by the global financial crisis in 2008, and its share price plummeted to a fraction of its previous value. However, since that time there has been reasonable growth, as you can see in the daily chart below.

Spread Betting Lloyds Shares

In fact, the chart shows several trading opportunities, with the MACD highlighting some of them.

With the global crisis, the UK government still owns nearly half of the stock of Lloyds Banking Group, the previous Lloyds TSB shareholders control about a third, and HBOS shareholders have 20%. Lloyds is literally “too big to fail”, as it holds around one third of all the UK’s mortgages and about a quarter of all savings.

But all this is history. For the spread better, the chart above shows that you can anticipate fluctuating prices, and opportunities for short term bets. It also demonstrates the value of using Bollinger Bands, which in theory capture 95% of the price fluctuations, and also tend to provide a boundary whether the trend is upward or downward. If you are spread trading on Lloyds Banking Group, be sure to protect yourself against losses by careful selection of your stake and your stop loss positions.

Lloyds Rolling Daily Spreadbet

The current rolling daily quote for the Lloyds Banking Group (LLOY) is 39.281 – 39.359. As this is quite low in comparison to many shares (less than 40p per share), you may consider placing a larger spread bet to compensate, but you should be careful to limit possible losses to a level you can afford. If you think that the shares are going up, you could place a spread bet for £15 per point at the buying price of 39.359.

If you hold this spreadbet for several days, you may notice that your account is being charged interest each evening for the roll over. This will not be a large amount, but you need to be aware of it. If your bet turns out to be a winner, you might find that the price goes up to 48.344 – 48.416, and you can close the bet and take your profit. Your bet was placed at the price of 39.359, and it closed at 48.344, giving you a gain of 8.985 points. Multiplying by your stake of £15, you would have won £134.77.

If, however, your bet turns out to be a loser, you will reach a point where you need to close the trade to protect yourself from any further losses. Suppose you decide this is when the price drops to 31.216 – 31.292. Closing the spread bet at this level, you can work out how much you have lost. The bet started at 39.359, and closed at 31.216. This is a loss of 8.143 points. Multiplying out, you have lost £122.14.

You may decide to use a stop loss order on this spread bet. This saves you having to watch the market all the time, as your spread betting provider will close a losing bet for you if it reaches a level you define. Suppose it was closed at a price of 34.543 – 34.606. Your losses now would be from 39.359 to 34.543, a total of 4.816 points. Your losses would have been restricted to £72.24 by using a stoploss order.

Lloyds Futures

Taking a pessimistic view of the banking industry, you may decide that Lloyds shares are going to go down over the next few weeks or months and decide to take out a short or selling position on a futures based spread bet. The current quote for the long quarter is 39.380 – 39.855. You could stake £20 per point at the selling price of 39.380.

Consider first that your bet has won, and you decide to cash it out when the spread betting quote is 32.689 – 33.132. The starting price was 39.380, and you closed the bet when the higher or buying price was 33.132, which means you gained 6.248 points, remembering that you bet that the price would fall. Multiplying by your stake, this amounts to winnings of £124.96.

You must always consider and allow that your bet may lose, and you should preferably have a level of loss in mind that you will limit yourself to. Suppose the price went up to 43.592 – 44.012, and you decided to close the bet and accept your loss. With an opening price of 39.380 and the closing price of 44.012, you have lost 4.632 points. Multiplying this by your chosen stake of £20 per point, the total you lost is £92.64.

Many traders decide to use a stop loss order to limit their losses. This is particularly useful if you cannot keep an eye on the market all the time, as it requires your spread betting provider to close your losing position before it gets too large, whether or not you are available. Using this, perhaps the losing position would be closed at the value of 41.986 – 42.530. Calculating your losses, the starting price was once again 39.380, and the closing price was 42.530. 42.530 minus 39.380 is 3.15 points, which with a stake of £20 per point would cost you £63.

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