BlackBerry Fundamentals
Research in Motion (RIM) has re-branded to BlackBerry (BBRY) as it attempt to concentrate attention on the brand. The company itself is a classic example of a volatile technology enterperise, and shows the advantages of spread betting over straightforward investment. In technology, fads and fashions are changing all the time. The BlackBerry, which caught the imagination for some time, has now fallen out of favour, and with it the shares of RIM, as you can see below.
Valued at its peak at about 14,000, the shares now trade for 750 on the NASDAQ (RIM is also quoted on the Canadian market, as it is a Canadian company).
Although it is a fiercely competitive business, with Smartphones and iPads in the same sector, what seems to have caused the ultimate blow to the market was a massive service outage in October 2011, which caused complete failure to tens of millions of consumers in North America, Africa, Europe, and the Middle East, and this lasted for several days. It is not even clear at this time whether RIM can survive, with several board members resigning in the current shakeup.
BlackBerry was founded in 1984, and used venture capital in 1995 to expand its market presence, resulting in an initial public offering in Toronto in 1998. In 2008 it was named one of Canada’s Top 100 Employers, and in 2009 Fortune magazine determined it was the fastest growing company in the world, with the growth of 84% in profits over the last three years despite the global recession.
The company is currently in 27 countries, but sales in the United States plunged 47% in 2011 with competition from the iPhone and Samsung’s Galaxy, and with rumours that Amazon is also looking to play in the same markets as RIM, the outlook is exceedingly grave. From a spread betting rather than an investing perspective, the shares are an attractive prospect, and could be profitable provided you can pick the right direction and stand the volatility.
BlackBerry Trading Example: Research In Motion Rolling Daily
While BlackBerry as a share may be too volatile for many spread traders, it has exhibited interesting price patterns in the past year or two. Some say it may be about to go under, but a recent change in management may produce a revival. The current price for a rolling daily bet is sell at 732.0 and buy at 735.0.
If you think that the decline in price will continue, then you might want to place a short bet at 732.0 wagering perhaps £5 per point. If you are correct, the price may go down to a quote of 683.1 – 686.1, and you might decide to take your profit if you see signs of a recovery.
Working out how much you have won with your sell bet, you note that the bet was placed at 732.0 and it closed at the buying price of 686.1. That means you have made 732.0 less 686.1 points, which is 45.9 points with your trade. As you staked £5 per point, simply by multiplying out you find you have won £229.50.
Whenever you place a bet, you must realize that the market may easily go against you. You should watch the price for any signs of this, and be prepared to close your trade if it is not working. Perhaps the price went up to 770.5 – 773.5, so you closed your bet at 773.5. That means you have lost 773.5 minus 732.0, or 41.5 points, which would cost you £207.50.
To save watching the market all the time, many spread traders use the stop loss order, which automatically closes the bet when it reaches a certain level, which you can set. Say in this case the stop loss order took you out of the trade when the price went up to 756.5 – 759.5. Again you have lost, but this time it is only 759.5 less 732.0, which is 27.5 points. This amounts to a financial loss of £137.50.
BlackBerry Futures Based Betting
Spread betting on BlackBerry shares, which are quoted on the American NASDAQ market, could turn out to be profitable but is not for the fainthearted, as the company has been going through turbulent times recently. If you think you can take the longer view, you may choose to bet on the futures prices, as if the prices turn against you, you can close your bet at any time and do not have to wait until the expiry date. Perhaps you decide that RIM is stepping up the fight against the iPhone and other technology, and may go up in value. With the current futures price of 726.1 – 733.7 for the far quarter, you decide to place a long bet at £8 per point.
Your bet was placed on the longer view that the market will turn around, so say that the price went up to 796.3 – 802.1 in a few months, you might decide to close your trade and take your profit. Your bet was placed at 733.7 and closed at 796.3, which means you gained 62.6 points. Multiplying by £8 your total winnings are £500.80.
On the other hand, the price might continue to fall after you place your bet, and you decide to accept your loss when the quote goes down to 683.2 – 689.5. Again, your bet was placed at 733.7, but this time it closed at the selling price of 683.2, a loss of 50.5 points. For your stake this amounts to £404.
Many traders use a stop loss order to take them out of the market if the price goes against them. This means you do not have to keep watching the markets all the time, and can save you some money by closing the bet quickly. Perhaps by using this your bet would have been closed when the price dropped down to 705.7 – 711.5. This time you have lost 733.7 minus 705.7, which is 28.0 points. That would cost you £224.
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