How to Spread Bet the Brazil Index
So you’ve heard of the BRIC countries, and wondered how you could get some of that action spread betting? Perhaps you should consider betting on the Brazil index, which is available with several online spread betting providers. By the way, if you haven’t heard of BRIC, it is an acronym standing for Brazil, Russia, India, and China, and Goldman Sachs issued a report in 2003 saying that they believe these four countries are emerging economies that will be the major economic powers in the world within the next few decades
There are various indices available that are based on the Brazil stock exchange, which is headquartered in São Paulo, Brazil. The major index is called the “Índice Bovespa” in Portuguese, sometimes shortened to IBovespa, literally the Bovespa Index, and this is the one you will find most commonly with your spread betting provider. The index was priced at 100 in 1968 when it was founded, and contains about 50 stocks. It is revised quarterly, and the 50 stocks are supposed to account for about 80% of the volume on the stock market and have been traded at least 80% of the days that the market was open.
Most of the companies named are not so familiar to Western ears, but they include the usual mix of construction, finance, energy, food, oil and gas, telecommunications, etc. The unit of currency in Brazil is called the real, and this has had a history of volatility and inflation compared to other currencies, resulting in many changes to the index in compensation. In fact, the Bovespa Index topped 70,000 in 2008, which gives you some idea of the amount of inflation that this country has suffered. As such the index is quite volatile and can move up to 500 to 1,000 points in a ‘normal’ day with movements of up to 5,000 points on particularly volatile days.
Nowadays, Brazil is reckoned to be a more stable economy than it has been, and in any case when you are spread betting to a trading plan you should be taking steps to ensure that you do not lose too much for those bets that go against you. The volatility of the Brazilian markets is a plus when you are betting, as you are looking for large changes in value to maximize your profits.
Apart from the main Brazil’s Bovespa benchmark there are several other stock market indices used in Brazil – there is a Brazil index which is based on approximately 50 companies, and there is another Brazil index which is based on approximately 100 companies, and then a few sector indices.
It can be an interesting prospect getting to know the Brazilian stock market, and the way that economics works in South America. That said, for successful spread betting of the Brazil index what you need is a good trading strategy which will identify opportunities, coupled with a sound understanding of how to place your bets and stop losses to minimize your exposure to adverse movements. You simply have to subject the Brazilian stock market charts to technical analysis, as regardless of where in the world the trading is taking place, human psychology will always cause the same types of market movements.
Brazil Index Spreads
The IBovespa, the Brazil index, is not available with every spread betting provider, so if you’re interested in betting on it you need to pick your spread betting company carefully. The current price of this index is 53,911– 53,971, and the spread of 60 points in part reflects the fact that the index is numerically much greater than most indices.
If you think that the Brazilian market is on the rise, you might place a long bet at 53,971 for £2 per point. If you were correct and the index increased, you might find you could cash in your bet when the quote is 55,063 – 55,123. If you did, then the amount that you would profit is easy to calculate.
You open your bet at 53,971, the buying price, and closed it at 55,063, the selling price. That means you had a total point gain of 1092. The amount of stake that you chose was £2 per point. If you multiply these two together, you find that your total winnings are £2184.
Sometimes the index will not go the way that you want it to, and you will lose. As soon as you realize you are going to lose, you can choose to close your bet and keep your losses small. Say the index went down to 53,768 – 53,828, and you closed your bet, which would be at a price of 53,768.
Working out your losses, your bet started at 53,971 and closed at 53,768. That means you lost 203 points. Because your bet was for £2 per point, your total loss was £406.
If you want to spread bet on the Brazil index, but your spread betting company does not list this one directly, then there are various other products that will allow you to spread bet on the Brazil market.
IG Index, for example, allows you to spread bet on the IBZL, which is an ETF modelled to follow the Brazil index. They even list rolling daily bets on this product, which is currently listed at 2901 – 2911. If you choose to follow the Brazil markets by spread betting on this, you still have the spread betting advantage that you can bet on the index going up or down.
Say you had decided that the Brazil markets will fall, you could take a short position by betting at an index level of 2901 at a price of, say, £7 per point.
Your bet will be rolled over automatically each day, with a small amount of interest in theory credited to your account (as you took a short position). After a few days you may see that the quotation has fallen to 2823 – 2833, and you decide to close your bet.
The number of points that you have gained is 2901-2833, which is 68 points. At your stake of £7 per point you have won £476.
If instead of dropping the price had gone up, putting you in a losing position, you may have decided to close your bet and accept your losses when it reached 2932 – 2942. In this case, the number of points that have been racked up against you is 2942-2901, a total of 41 points. This means you would have lost £287.
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