FTSE techMARK 100 Spread Betting
The UK techMARK is a specialist index, unlike most other indices. It concentrates on technology companies, and recognizes the ones that are innovative in driving social and economic development. Therefore, its performance is highly connected to the high-tech markets, and only peripherally affected by other areas. The point of the techMARK section of the London Stock Exchange is that it focuses investors on the companies that are at the cutting edge of technical developments, helping them to attract investment capital.
One of the conditions of being included on this index is that there is a commitment to research and development, and all companies are reviewed by a specialist board for eligibility. However, the particular technology is not specified so the industry can be in any sector, from computers and software to oil and gas, and transportation. This section of the market was launched in 1999, with a more specialized medically focused part launched two years later.
Because of this emphasis, with expenditure being on more than simple production values, there is a certain amount of uncertainty in the effectiveness of capital investment, so you can expect the index to be a little more volatile than most. Nonetheless, as there are more than 100 companies in this specialist area of the LSE there is inevitably a smoothing of the worst fluctuations.
If you want to spread bet on the UK techMARK index, then you must study the previous charts to get an idea of the amount of fluctuation you can expect in the price. While it may help if you have some idea of current innovations, because this is an index it is not dependent on any particular technology or invention, thus individual company performances, while affecting the value, will not have a major effect.
In the long-term, this section of the LSE, which is to encourage investors to meet up with research funding requirements, should have a beneficial effect to the included industries. This means that you can expect a gradual uptrend over time. Because of the way that technical analysis works, you will find that bets with the overall trend are more likely to succeed, and therefore long spread bets are slightly better; but you need to apply technical analysis and choose the right time to make them, as inevitably there will be retracements against this trend.
With the all or nothing results that sometimes accompany innovative research, you might expect that this index will not show a consistent result. In practice, it has grown without excessive volatility over the past few months, belying this idea.
It is sometimes considered surprising that you can apply the same technical analysis to a market such as this, as well as commodity markets, traditional large manufacturers, and all the other financial sectors. The reason for this is that technical analysis depends on human nature, which does not change regardless of the financial instrument you are trading, so if you have a thorough grasp of technical analysis you can apply it wherever you find a suitably volatile financial security.
Spread Betting on the UK Techmark
Just a couple of months ago, the UK techMARK index was trading around 2000 points, but now the spread betting quote for the rolling daily bet is 2296 – 2300, and it has experienced a steady growth. If you want to place a long bet on the index, believing that its value will continue to increase, you can do so at the price of 2300, and you might want to bet £2 per point.
Because this is a rolling daily bet, you are open to a daily interest charge each evening, when the bet is rolled over to the following day, and this will be taken from your account. Provided you are an active spread better, holding onto your bets for no more than a few weeks, then the interest charge will not be significant. Suppose that the index goes up to a value of 2472 – 2476, and you decide to close your bet and collect your winnings. This is how you can work out how much you have won: –
- You placed your long bet at 2300.
- Your bet closed at a value of 2472.
- That means you have gained 2472-2300 points.
- Your point gain is 172.
- Your stake was £2 per point.
- The amount you have won is 172x£2.
- Your total winnings are £344.
You learn early on when you are financially trading that you can never be sure where the price is going to go. You must take your losses and move on to the next bet. Say the index went down after you placed your bet, you might have closed your position when it reached 2273 – 2277. You can work out how much you lost in the same way: –
- You placed your long bet at 2300.
- Your bet closed at a value of 2273.
- That means you have lost 2300-2273 points.
- You lost 27 points.
- Your stake was £2 per point.
- The amount you have lost is 27x£2.
- Your losing bet cost you £54.
As a second example of a spread bet on the UK techMARK, perhaps you would go short for £3.50 per point on a futures style bet where the quote is 2299 – 2315 for a bet expiring in the further quarter. Assume you are right, and the price drops to 2236 – 2248. You could close your bet and take your winnings.
- Your short bet went on at 2299.
- The bet closed at 2248.
- So you gained 2299 less 2248 points.
- A total of 51 points gained.
- With a stake of £3.50 per point, you have won £178.50.
If your bet was a losing one, and the index rose to 2324 – 2336, you could close your bet and work out your losses like this: –
- Your short bet went on at 2299.
- The bet closed at 2336.
- So you lost 2336 less 2299 points.
- A total loss of 37 points.
- With a stake of £3.50 per point, you have lost £129.50.
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