Spread Betting Admiral Group
The Admiral Group plc [ADM.L] is primarily a motor vehicle insurance company, and also includes insurance for breakdown cover and legal expenses. It is head-quartered in Cardiff, Wales, and sells insurance directly to the public in the UK through several different brands, including the insurance comparison site confused.com. The group started as recently as the 90s, had a management buyout in 1999, and was floated on the stock market in 2004 at an initial price of 275 pence.
As you can see from the chart, the company has had a volatile existence in the few years since it went public, but is now reporting excellent earnings and expansion, leading to another uptrend as can be seen on the right. Perhaps unsurprisingly the FTSE 100 stock has gained popularity with spread betters in recent years. Its current market share is about 11% of the UK market, and it has also expanded into European markets, although those branches are yet to report a profit. The Spanish company Balumba.es was the first European venture in 2006, and several others have been added in the last couple of years.
The Admiral Group appear to be excellent in branding and forming separate divisions for niche markets, for instance, the Diamond division for female drivers, and the Gladiator division for commercial insurance. As shown in the chart above, the company is just coming off of a year-long downtrend, but seems to have turned the corner with its latest figures which include nearly 40% higher turnover and 14% increase in annual profit.
Given the proven volatility of this company, the spread trader may want to consider extra caution in placing spread bets. It appears to have good potential for profit, and if you have a profitable trade it would be wise to trail your stoploss up to preserve your gains, assuming that you are betting on the occasion of an uptrend.
Spread Bet on Admiral Group Shares: Rolling Daily
The Admiral Group combines several different motor insurance companies, based mainly in the UK with headquarters in Wales, but also extending into the European market. The current quote for a daily spread bet is 1185.8 – 1188.2. If you think that is going up in price, you could place a long trade for £5 per point at the buying price of 1188.2.
If you are correct and the price goes up, you might decide to close your spreadbet when the quote is 1223.6 – 1226.0. The bet would close at the selling price of 1223.6. To work out how much you have won, all you have to do is calculate the difference in points, 1223.6-1182.2, which is 35.4, and then multiply it by your stake to get £177.
Often in trading the price does not go in the direction that you hoped for, so say in this case it dropped to 1158.9 – 1160.3 and you decided to close your spread bet. Your loss in points is 1188.2-1158.9, which is 29.3, so it cost you £146.50.
Instead of waiting until the price fell before deciding to accept your losses, you could have placed a stop loss order when you opened the trade. This would automatically take you out of the position when a certain price was reached. Say it triggered and closed your trade when the price was 1172.6 – 1175.0.
In this case, your spread trade would have been placed at 1188.2 and closed at 1172.6, giving you a loss of 15.6 points. As you can see, this has saved about half the loss you sustained above. Multiplying it out, you lost 15.6 x £5 per point, which works out to £78 lost. This clearly demonstrates the advantage of having a stop loss order to manage your trade, as you do not need to keep an eye on the market.
Admiral Group Futures Betting
The Admiral Group has seen many ups and downs in recent years, so you need to apply technical analysis to determine which way the crowd sympathy is at the moment. Say you believe that the uptrend is due for a retracement; you may want to place a short or sell spread bet on the price, which is currently quoted at 1191.2 – 1203.2 for nine months away. Perhaps you choose to wager £6 per point.
If you are correct, you may see the price drop to 1146.5 – 1158.5 and decide to close your trade. You work out how much you have won like this: –
- Your bet went on at 1191.2, the selling price
- Your spreadbet closed at 1158.5
- You have made 1191.2 minus 1158.5 points
- Which is 32.7 points
- Multiplying by your stake, you won £196.20
Of course, you may find that your spreadbet is losing, and decide to close your position when the price has risen to 1210.7 – 1222.7. In this case, the calculation is similar, as you must first work out how many points you lost: –
- The spreadbet was placed at 1191.2
- The bet closed at 1222.7
- This means that you lost 1222.7-1191.2, which is 31.5 points
- For a total loss of £189
With a futures style spread bet you may find that the spread makes it hard for you to keep your losses down. However, you could have put a stop loss order on to close the spread trade when it was quoted at 1206.4 – 1218.4. This saves you having to monitor the price all the time. In this case your losses would have been 1218.4-1191.2, or 27.2 points. At £6 per point, you lost £163.20.
Join the discussion