Spread Betting on the BEL 20 Index
The BEL 20 index is a share index used to reflect the economy of Belgian stocks, traded on the stock exchange in Brussels. In this way, it is similar to an index such as the FTSE 100, or the Dow Jones Industrial Average. It is a capitalization-weighted index, which means the value contribution of each company included is weighted according to the share value of the company.
It varies slightly from many other indices, in that it is not a fixed number of companies, but a minimum of 10 and a maximum of 20, with various rules applied to decide which companies are eligible and included. The index started at 1000 as a base value in 1991, and is now around 2200.
The index is reviewed at the end of each year, and then updated at the beginning of March. Further updates are applied every quarter, until the next annual update. The conditions applied include that the company must be representative of the Belgian share market, and at least 15% of the shares are freely available, preventing any company that is in practice privately owned from taking part. The company has to be large enough for inclusion, with the share value being at least 300,000 times the price of the index at the end of the year for a new company to be included, and if it drops to below 200,000 times the index the company is taken out. Even then, no company can account for more than 15% of the index when it is reset, although this percentage can increase during the year if the shares go up in value.
At the time of writing, there are 19 companies in the index, and with the exception of the name Anheuser-Busch, many of them would not be recognized by the man on the street in England. All these details show you that the index is a direct reflection of the health of major companies on the Belgian stock market, and therefore describes the economy of Belgium. If spread betting on the Belgian markets is something of interest to you, then you must take care to understand what drives the economy.
Firstly, there are various economic indicators that Belgium issues, which point to the financial mood of the nation. These include the obvious factors such as the amount of unemployment, and whether it is going up or down; the Gross Domestic Product, a measure of how productive the economy has been; rate of inflation; and other statistics. Belgium cannot be considered in isolation, because it is dependent on import and export to other countries, and is therefore affected by global economic issues.
However, for the purposes of spread betting you are much more concerned with day-to-day fluctuations than with where the economy will be in a year’s time; therefore you need to study the price charts and apply technical analysis to determine the best places to enter and exit your trades, and the direction that you should be assuming for your bets.
How to Spread Bet the BEL 20 Index
If you are interested in spread betting on the BEL 20 index, then you should take time to study the charts and see how it has been moving recently. One very important factor is the amount of volatility, as this will give you an idea of where to put your stop loss, which will keep your losses down if the price does not move as you expect. The current value of the BEL 20 is 2258.40 – 2268.10 with IG Index, and this is for a futures type of bet, expiring in the next quarter.
As an example, perhaps you decide from your analysis that the index should go up. The minimum bid is £2 per point, but you choose to wager £4 per point, having made sure that will not lose you too much if the bet goes against you. Say the price goes up to 2376.25 – 2385.95, and you close your bet to collect your winnings.
The calculation of how much you won is fairly simple: –
- You placed a buy spread bet at 2268.10
- The spread betting position was closed at 2376.25
- That means you won 2376.25 less 2268.10
- This is a total of 108.15 points
- Your spreadbet was for £4 per point
- Therefore you won 108.15x£4, which is £432.60
You might have lost on this bet if the price went down, and you would have to decide to close the bet and limit your loss. Say it went down to 2235.62 – 2245.32 and you closed your bet.
You can work out how much you lost in a similar way: –
- You placed a buy spread bet at 2268.10
- The bet was closed at 2235.62
- That means you lost 2268.10 -2235.62
- This is a total of 32.48 points
- Your bet was for £4 per point
- Therefore you lost £129.92
If you had decided that the index was going down in the first place, you could have placed a short bet at the price of 2258.40. Say you wagered £7.50 per point on a sell bet. If you are right, the index might go down to 2124.50 – 2134.20, and you could close your trade and take your profit. Here is the calculation: –
- You placed a sell spreadbet at 2258.40
- You closed the bet at 2134.20
- That gives you a profit of 2258.40-2134.20 points
- That works out to 124.2 points
- Your spreadbet size was £7.50 per point
- Multiplying that out, you found you have won £931.50
Once again, your bet may have turned out to be a loser. Say the index went up instead of down, and you decided to accept your losses when it reached 2285.47 – 2295.17. Closing your bet, you work out how much you lost: –
- You placed a sell bet at 2258.40
- You closed the bet at 2295.17
- That means you lost 2295.17-2258.40 points
- That works out to 36.77 points
- Your bet size was £7.50 per point
- Multiplying that out, you found that the bet cost you £275.77
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