Spread Bet on International Power plc
International Power plc is an international electricity generator, and it was formed in 2000 from the old National Power, which de-merged its UK business. It was first listed on the London Stock Exchange in 2000. International Power owns 100 power stations of all types, including 11 in the UK which are powered by coal, oil, gas, and wind.
This monthly price chart shows the volatility of the power sector, and also its pattern of growth in recent years. During the global economic crisis in 2008, many shares lost value, and IP’s dropped to half of its previous price is not unusual.
However, if you want to spread bet on International Power then you may have to hurry. The French company GDF Suez acquired 70% of the shares in 2010, paying for them it by transferring its assets and business in certain areas to International Power. The remaining 30% is still held by shareholders.
This has not prevented IP from continuing to expand its scope, agreeing to a lease with the Crown Estate for a tidal power project in October 2010. However, GDF is seeking to purchase the remaining 30% and take on full ownership of International Power. Because of the size of the companies, they will have to satisfy the regulators before the takeover is allowed. But the first hurdle is for GDF Suez to convince the shareholders that remain to accept its offer. The directors intend to recommend acceptance of the offer of 418 p, which values the company at more than £22 billion.
If you have the opportunity and choose to spread bet on International Power, then you need to be aware that you are basically taking a bet on the acquisition, and its outcome. You will know in advance the amount that the shares may be worth, but not necessarily whether the shareholders will agree to the sale.
How to Spread Bet on International Power plc: Rolling Daily
While the prospect of a takeover is looming over International Power, it is likely that the share price will be stabilized to the offer that has been made. Depending on the market view, the price could go up or down if it seems that the takeover will be blocked, either legislatively or by the shareholders. The current price for a rolling daily bet is 417.78 – 418.72.
If you think that the shares will go up, then you could place a long bet, buying for £10 per point at the price of 418.72. Assuming that the price does go up, then you can exit it for a profit when it reaches, say, 436.27 – 437.20. Working out your bet, you have gained 436.27-418.72 points, which is 17.55 points. That amounts to a total of £175.50.
In the world of trading and spread betting, nothing is truly predictable, and you will find that individual spread bets often lose. Perhaps in this case the price fell after you had placed the bet, and you decided to close your spread trade and accept your losses when it went down to 405.23 – 406.16. You placed your spread bet at a price of 418.72. The trade closed at the price of 405.23. That means you lost 418.72 minus 405.23 points, which is 13.49 points. With a stake of £10 per point, you would have lost £134.90.
Often spread traders protect themselves from losses becoming too large by having a stop loss order in place. This tells the spread betting company to close your losing trade when it reaches a certain level. Perhaps if you had had a stoploss on this bet, the trade would have closed at a price of 409.63 – 410.55. The opening price was still 418.72, but this time the trade closed at 409.63. 418.72 less 409.63 is 9.09 points. In this case the losing spread trade would have cost you £90.90.
International Power plc Futures Based Spread Bet
The multinational company International Power may be taken over by the French GDF Suez company, but you can bet on this outcome and the future demand for power by taking out a futures based spread bet. The current price offered for a mid quarter futures bet, which expires in four months time, is 418.48 – 421.94. You can take out a short bet on this price for, say, £16 per point, and wait to see what happens in a few weeks and months.
If you are correct, and the price falls, possibly because the takeover fails, then you might find that the spread betting price goes to 406.23 – 409.42. Because you made a short bet, you have won if you close the bet now. The price you placed the bet at was 418.48, the selling price, and the price that the bet closes at is 409.42, the buying price. The difference is 9.06 points. With a stake of £16 per point, you have won £144.96.
On the other hand, you might find that the price goes up if the takeover fails, with the shareholders demonstrating that they believe the offer was below the value. If the price goes up to 425.92 – 428.56, you could close your spread trade and accept your loss. The spread bet was opened at a price of 418.48, and it closed at the price of 428.56, a difference of 10.08 points. In this case you would have lost £161.28.
It is always bad if your losses are greater in value than your wins. If you had set a stop loss order on this open bet, making your spread betting provider close it before the losses were too great, you might find that you were out of the spread trade when the price went up to 422.85 – 425.55. In this case the opening price was 418.48, as before, and the closing price was 425.55. The difference in points was 7.07, which multiplying by £16 gives you a loss of £113.12.
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