Spread Betting Range Resources
Range Resources is an independent Texas company founded in 1976 and known for its oil and gas exploration and production. It is listed on both the London Stock Exchange, and on the US markets, and it is likely that you can spread bet on either of these through your spread betting provider. It has a turbulent financial history, as you can see from looking at its recent price chart (this is shown for the LSE listing, the US listing goes back further): –
The interesting thing about this company is that is a leader in high-volume hydraulic rock fracturing techniques which are being used to produce shale gas. This process is called “fracking”, and it has caused a lot of controversy. This in itself may explain some of the price volatility. Exploration has mainly been in rural areas, and there have been reports of gas coming out of water outlets, in other words entering the underground water reservoirs from which well water is pumped. Other reports say that the water is contaminated by the process. Engineers for the company assert that the gas is taken from much deeper down underground than the water table, and there should not be any cross-contamination.
The discovery of this gas marks a turnaround for the company, which was only interested in some old gas wells in Appalachia prior to this significant breakthrough. The size of the reservoir is estimated to be enough to supply one quarter of the US natural gas needs by 2020. Forbes magazine called Range Resources the “King of the Marcellus Shale” in 2010, estimating its resources as worth US$8 billion. Unlike drilling in the Gulf of Mexico, with its attendant risks as evidenced by the Deepwater Horizon incident, it seems that shale gas could be the way of the future, subject to quieting public concerns and complaints.
This may not be easy to do, and may cause further volatility in the price, depending on news stories and further reports. Range Resources has already been fined more than $200,000 by the Commonwealth of Pennsylvania for contamination incidents, though these were specific and not directed at the fracking process. The company has set up a website for public relations purposes, publicizing stories of people benefitting from leasing their land for gas exploration and declaring that the company was environmentally sensitive.
However, at the time of writing there are many unresolved issues, media investigations, and upset neighbourhoods. As far as spread betting is concerned, this would point to continuing volatility in the price, with any major announcements having a dramatic effect either for or against the company. It appears that in the end Range Resources will be able to continue exploiting the gas reserves, but in adverse circumstances this could prove costly for the company, and therefore depress the share price.
Given the expected volatility, if you want to spread bet on Range Resources then you need to have a clear trading plan, and preferably some experience in fast-moving prices. For preference, this should not be a company considered by the novice spread better.
Spread Betting on Range Resources
Range Resources is a USA company that is quoted on both the UK and American markets. It is in the oil and gas exploration sector, and because of this and the particular resources which it is utilizing can be considered a volatile stock on which to bet. The current spread betting price for the company listed on the London Stock Exchange is 11.721 – 11.779.
When you are spread betting on Range Resources stock, it is a good idea to stay in touch with the latest news as this will have a major influence on the direction of the price. If you think that the price is going to increase, you can place a long bet at 11.779. As the share is a relatively low value, at 11 pence, despite the volatility you decided to wager £50 per point.
Suppose that the price goes up to 13.235 – 13.293, and you decided to collect your winnings. You can simply work these out by figuring how many points you have gained and multiplying them times your stake. The long bet was placed at 11.779, and it closed at the selling price of 13.235. Working out 13.235-11.779 you find you have gained 1.456 points. Multiplying this by your stake, you have won £72.80.
It often happens that your bet will not go in the right direction, and you need to close it to avoid further losses. Say the price went down to 11.346 – 11.404 and you closed your bet. Your bet still went on at 11.779, but it closed at 11.346. 11.779-11.346 is 0.433 points, which means you lost £21.65.
You can also take out a futures style bet on this financial product. The current spread betting price for a bet for seven months away is 11.766 – 11.908. If perhaps you think that the company will fall into further trouble with its fracking process, you might want to place a short bet for £100 per point.
After a few weeks or months perhaps the price drops to 8.362 – 8.506, and you decide to close your bet and collect your profit. As this was a futures based bet, there have been no charges to your account while you have held the bet. You should also note that you can close the bet at any time, you do not have to wait until the expiration. Your short bet went on at the selling price of 11.766, and it was closed at the buying price of 8.506. Taking one away from the other, you find you have gained 3.26 points. At your chosen stake of £100, this means you have won £326.
Once again, you must consider that your bet may not have been a winner and you may need to close it before it goes too far in the wrong direction, so that you minimize your losses. Say the price went up to 12.321 – 12.456, and you decided to close the bet and accept that this one did not win. The bet was opened at 11.766 and it closed at 12.456. That means you lost 0.69 points, or £69.
Trader Opinion Update August 2012: I feel sort of gutted for RRL holders. The book value must now fall back to 2010 at least so down to 2p imo and down to 1p if they have to raise discounted cash. They will have to sell their best assets to survive (like HAWK did) and/or raise heavily discounted to s/p cash (like HAWK did). Directors of these sorts of companies have a tendancy to worry more about their salaries than the share price. If they can keep banking the salary for another few years before the company goes belly up they will regardless of what happens to the share price and share dilution (like HAWK did). This is just so like HAWK – all the same old lies, hopes & dreams. The shareholders get shafted while the directors keep raking in their salaries and lavish lifestyles they don’t deserve.
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