Spread Betting on the Poland 20 Index
Spread betting on the Poland 20 index may not be the first thing that enters your mind. It is one of the less well-known indices, and is also known as the WIG 20 if you are searching for information about it on the Internet. It is a capitalization weighted index of 20 Polish stocks which can be found on the Warsaw Stock Exchange. Its value was set at 1000 in 1994, and is now around 2300.
It is interesting that all the awareness of the financial markets is paid to the existing “first world” markets and to the “emerging markets”, those countries that are rapidly developing a place in the world, in Asia and in Latin America for instance. There is not much attention paid to Eastern and Central Europe, and the ex-communist countries. There are real possibilities of long-term growth in this area.
Looking at the current situation, the debt crisis continues to consume “Europe”, it would seem, but in this context we are only talking about the developed side of Europe. Countries such as Poland have relatively low taxes and wages, and skilled labour available, and thus their economies are growing. Inflation is still relatively low, and the populace has not taken on the Western world’s addiction to debt, with all the consequences that has on the economy.
So in the context of a relatively healthy and expanding economy, the Poland 20 deserves a fresh look. Because spread betting allows you to make money from both increasing and decreasing prices, it is not always necessary to find the expanding economies. However, it is usually worth trading in the direction of the general trend most of the time, as this increases your chances of having a winning bet, so you should be particularly looking for long betting opportunities on the WIG 20.
What you do have to take into account when you are considering your spread bet is the state of the economy that exists, as it will be somewhat different from what you’re used to. The index will change according to whether the economy, and therefore the stock prices, gets better or worse, and this must be judged with respect to the existing conditions in Poland. It is futile to try and compare the unemployment or inflation figures with those that you would expect in England or another country you are familiar with, and draw conclusions about how well the economy is doing from that.
Looking at the price chart, the Polish 20 exhibited a lot of volatility in 2011, with long candlestick lengths indicating that the price was changing significantly; the price also trended up and down a lot. Currently, the candlesticks are very short, showing that the prices are not changing much. Sometimes this is viewed as indecision in the market, for instance as in the Doji candlestick, but in this case it seems to be a long-term trend and not a reversal signal. The Bollinger Bands are narrowing, so typically we would look for a breakout up or down to occur shortly.
How to Spread Bet the Poland 20 Index
Before you start spread betting on the Poland 20 index, you should study the chart for the preceding period so that you can get an idea of how it is trending, and how much volatility you can expect to see in the price. The current spread betting price is 2318 – 2328 for the next quarter futures price. Suppose that you believe that the Poland 20 will increase in value, you could place a buy or long bet at 2328, wagering perhaps £5 per point that the quote will go higher than this.
Say you are correct, and the quote for the index goes up to 2435 – 2445. This is a futures style bet, so you can at no charge allow it to continue until the quarter is up; but if you decide that you want to take the profit, you can close it at any time, so this is what you do.
- Your long spreadbet was placed at 2328
- You closed your spreadbet at 2435
- That means you gained 2435 less 2328 points
- This works out to 107 points
- Your spreadbet was for £5 per point
- Therefore you profited 107x£5, which is £535
When you place a bet, you should always know the point at which you will quit, if it goes against you. Say you reach this point when the quote goes down to 2295 – 2305, and you close your bet and accept your loss.
- Your long spreadbet was placed at 2328
- You closed your bet at 2295
- That means you lost 2328 -2295 points
- This works out to 33 points
- Your spreadbet was for £5 per point
- Therefore you lost 33x£5, which is £165
As a second example, assume that you thought instead that the index would be going down and therefore placed a short bet for £8.50 per point at the selling price of 2318. In due course, perhaps the index went down to 2156 – 2166, and you closed your bet to collect your winnings.
- You placed your short bet at 2318
- Your spreadbet closed at 2166, the buying price as it was a short bet
- Therefore you gained 2318 less 2166 points
- Your total gain was 152 points
- Your stake was £8.50 per point
- Therefore you won 152 times £8.50
- Your total winnings are £1292
Again, you need to look at the case of a losing bet. While you hope that you will not lose, and you should not expect to lose as much as half the time, you will find that you will lose more than you want to, and the way to profit is to close your losing bets quickly, so that they do not incapacitate your account. Say the index went up to 2346 – 2356, and you close your trade.
- You placed your short bet at 2318
- Your bet closed at 2356
- Therefore you lost 2356 less 2318
- Your total loss was 38 points
- Your stake was £8.50 per point
- Therefore you lost 38 times £8.50
- Your bet has cost you £323 this time.
Join the discussion