Spread Bet on Reckitt Benckiser Group
The Reckitt Benckiser Group is a multinational consumer goods group headquartered in Slough, in the UK. It is the world’s largest producer of cleaning products, and also a major producer of personal and healthcare products. It came out of a merger in 1999 between Reckitt & Colman, the English company, and Benckiser which hails from Holland. As such, the company can trace its origins back to the beginning of the 19th century, when Colman’s was established in 1814, and Reckitt’s in 1840. Colman’s may be best known for Colman’s mustard, but in actual fact the food side of the business was sold off in 1995.
Reckitt was first listed on the London Stock Exchange in 1888, and was more on the household goods side, first producing starch, then other household products. The Benckiser business was founded in Germany in 1823, and went public in 1997. The combined company is focused on providing consumer needs, and carries many famous brands such as Lysol, Dettol, Brasso, Durex, Cherry Blossom, Airwick, Mr. Sheen, Windolene, and many more. These products are sold in nearly 200 countries. In 2005 Reckett’s bought the over-the-counter drug business of Boots, getting the brands Clearasil, Strepsils, and Nurofen, among others.
Because of the tremendously varied line of products, and the fact that most of these could be considered essentials, you will see there was very little dip in share price at the time of the global economic recession, 2007/2008. While Reckitt Benckiser does not have good growth at the moment, its price is trading in a range and holding its own against the market. The company’s current strategy is to concentrate on about 20 leading brands and to focus on them, looking to them to spearhead its future expansion. Whether this results in the return to the rapid growth of a couple of years ago, or whether neglecting other known brands will have a negative effect, there will be opportunities for the spread better.
Reckitt Benckiser Group Rolling Daily
Reckitt Benckiser plc is a relatively young company, but is made up of companies that started in the 19th century, specializing in household goods with famous brand names. The current rolling daily quote is 3414.6 – 3421.4. At the moment the price seems to be trending sideways, going up and down within a limited range, and therefore you need to use a sspread betting strategy designed to take advantage of this. If you think that the price will go down, you could place a short bet at the selling price of 3414.6, staking perhaps £4 per point.
Firstly, assume that the price falls as you had thought, and you decide to close your spread trade and collect your winnings when the quote goes down to 3287.5 – 3294.3. As this is a short bet, the closing price is the higher, or buying, price, in this case 3294.3. The opening price was 3414.6, and the closing price 3294.3, which means you gained the difference, 120.3 points. For your size of stake, that is a profit of £481.20.
Secondly, perhaps the price will move in the opposite direction to the one that you wanted. This often happens, as the markets are prone to move as a result of many influences, and are difficult to predict. If you are in a losing bet, your task is to close it quickly, just as soon as you realize it will not work out, to minimize the cost to your account. Say you closed out the spread bet when the price went up to 3503.2 – 3510.0. In this case the closing price is 3510.0, so the number of points you have lost is 3510.0 minus 3414.6, or 95.4 points. At £4 per point, this would have cost you £381.60.
Many traders and spread betters use stop loss orders to minimize their losses, when a trade goes against them. In this case, you might find that the trade would have been closed at 3486.1 – 3492.9 with your stop loss order, reducing your loss. Your spread bet was ended at a price of 3492.9, just 78.3 points higher than your entry price, at a cost of £313.20.
Reckitt Benckiser Group Futures Based Bet
This company provides many different household goods, and while not exciting or innovative on the whole, has a steady operation. The current futures based bet for the far quarter is priced at 3434.4 selling price, 3446.4 buying price. If you think that the price will go up, you might stake £3.50 per point on a long bet at 3446.4. Following the market, you see the price go up to 3623.2 – 3634.1, and decide to close your spread trade and collect your profit.
This trade was opened at 3446.4. A long bet closes on the selling price, which in this case is 3623.2, therefore you have gained the difference between these two numbers, 176.8 points. With a bet of £3.50 per point, that means you have won £618.80.
Of course, while you will always choose your bets carefully, there is no guarantee that any particular one will win. Successful spread traders are those who win on average, with greater gains than losses. Say the price went down to 3303.3 – 3314.2, and you decided to cut your losses and close the trade. The bet was opened at 3446.4, and it closed at 3303.3, a loss of 143.1 points. At your chosen stake of £3.50 per point, that represents a £500.85 loss.
One way that many spread traders limit their losses is by setting a stop loss order when they take out the bet. This order tells your spread betting provider to close your trade if the loss gets to a certain level, and is very useful as you do not need to be watching the market at the time. Say you had a stoploss order on this bet, and again the price went down. Perhaps the stop loss would close your bet for you when the quote was 3346.8 – 3358.6. Your opening price was 3446.4, as before, and the closing price was 3346.8. The difference is 99.6 points, therefore your loss was limited to £348.60.
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