Spread Betting Anglo American plc
Anglo American plc [AAL] is a multinational mining company based in London involved in the mining of coal, copper, nickel, platinum and diamonds. It has operations around the world, and is the world’s largest producer of platinum, extracting about 40% of all platinum output. It has more than 100,000 employees, and a market capitalization of more than £30 billion. Although its primary listing is on the London Stock Exchange, it has a secondary listing in South Africa, on the Johannesburg Stock Exchange, because of the size of operations there.
The business started in the early twentieth century mining Zambian copper. In the forties and fifties it moved into coal and gold mining, still on the African continent. It wasn’t until the sixties that it ventured to the American continent, with mining in Canada. The expansion included iron ore and other metals, timber, and paper. The current division between products is given on Anglo American’s website as mainly iron ore and manganese, secondly copper, next metallurgical coal including clean coal research, then thermal coal, platinum, diamonds, and nickel. It now operates in both North and South America, Africa, Asia, Australia and parts of Europe. Following mergers, takeovers and divestments in recent years, it now has little interest in gold and paper.
As you can see from this chart, Anglo American has had a stormy recent past and the stock itself is today quite a popular spread betting market. This represents a terrific opportunity for the spread better who has mastered technical analysis and can form a judgement of the likely direction of movement of the price. For instance, in September 2010 you can clearly see a buy signal from the MACD, which along with the Doji candlesticks at least merited attention. Similarly in January 2011 the MACD gave a sell signal and the price duly dropped into the lower part of the Bollinger Bands, which it followed down. November saw the Bollinger “squeeze” which is often followed by a breakout, as it was in this case.
With a volatile entity such as this, be careful to guard against too much loss should the price turn against you, but use technical analysis to guide your spread trades.
Anglo American Rolling Daily
Anglo American has proved to be a volatile stock, which presents opportunities for traders. The current price for a daily spread bet is 2296.2 – 2300.8. Say you believe that the stock is going to reverse and go up, you could place a sell or short bet for £3 per point. A look at the chart shows the SMA(20) at 2540, and the higher Bollinger Band at 2900, so this would be your target level if the SMA(20) is broken.
Suppose that you were right that the stock price would rise, but it failed to break the simple moving average, so you settled for closing your spread trade for a profit when the price hit resistance and came back down to 2501.3 – 2505.9. Your spread bet was placed when the buying price was 2300.8, and closed at the selling price of 2501.3, giving you a total point gain of 200.5. At your stake of £3 per point, you have won £601.50.
The markets are not always going to go as expected, so consider that the price may have dropped and you would choose to close the trade when it reached 2113.0 – 2117.6. To work out your losses, simply take 2113.0 away from 2300.8 to get 187.8 points, which multiplied by your stake works out to £563.40 lost.
Of course, you might have noticed that the lower Bollinger Band was at around 2200, and decided to put a stop loss order at this level, reasoning that if the level was broken, the downtrend was continuing. Say the stop loss order triggered and closed your spread bet at 2198.6 – 2203.2. This time you lost 2300.8 minus 2198.6 points, which works out to 102.2 points. For your chosen stake of £3 per point, you have limited your losses to £306.60.
Anglo American Futures Style Bet
The current quote for the next quarter for Anglo American plc is 2299.4 – 2308.7. If you anticipate that the downtrend will continue, you might want to take a short position for £2.50 per point. As it is a short spread bet, it will be placed at the selling price of 2299.4.
Suppose that you are right, and the price keeps trending down. You may choose to close the spread trade and take your profits when it reaches 1986.2 – 1995.3, if you see signs that the trend is weakening or reversing. It is important for your overall profitability that you make the best you can out of any winners, so you should not close your spread bet until you see a reason to.
To work out what you have won, first you calculate the points you gained. The spread bet was placed at 2299.4, and it closed on the “buying” price, 1995.3, as it was a short bet. The difference between these is 2299.4-1995.3=304.1 points. At £2.50 per point, this is a win of £760.25.
Despite your endeavours, you will find that you have a number of losers. Say this downtrend reversed, and you decided to close your bet when it went up to 2543.2 – 2552.5.Then you can work out how much you lost in a similar way. The point difference is 2552.5 less 2299.4, which is 253.1. Multiplying by your stake, you have lost £632.75.
It is a good practice to set a stop loss order whenever you place a spread bet or trade. This tells your spread betting company to close your bet if it goes against you by a certain amount, and means that you do not have to keep watching the prices. Say your stop loss closed the bet for you when the price rose by 100 points – the amount is your choice. So the spread bet closed at 2400.2 – 2408.9. The stop loss does not close at the exact number, but simply sends out a note to close at the current market price.
Your spreadbet was placed at 2299.4, and closed at 2408.9. That means you lost 109.5 points. For the amount that you wagered, this works out to £273.75.
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