Spread Betting GlaxoSmithKline
GlaxoSmithKline is the latest incarnation of the pharmaceutical industry based in London. It is reckoned to be the world’s fourth-largest pharmaceutical company, based on the amount of prescription drugs sold. It is also the fifth largest company on the London Stock Exchange with a £81.5 billion cap. Over the years, GSK has built up an extensive portfolio of many different drugs and prescriptions, and it has operations around the world.
GSK was formed from GlaxoWellcome and from SmithKline Beecham in 2000. The Burroughs Wellcome company was founded in 1880, and Glaxo was founded in New Zealand in 1904. These two merged in 1995 to form Glaxo Wellcome. In 1830 Smith opened a pharmacy in Philadelphia and in 1865 Kline joined the business to form Smith Kline and Company. Thomas Beecham started Beecham’s Pills, a laxative, in England in 1843.After various other acquisitions, SmithKline merged with Beecham’s in 1989.
It is usually reckoned nowadays that the healthcare industry is one of the few that can be relied upon for continued growth, given the ageing world population, and the research and innovation being made in medicine. Having said that pharmaceuticals megacaps like GlaxoSmithKline (GSK) and AstraZeneca (AZN) have encountered their own fair share of problems involving patent expiries, increased competition from generic products and rising costs of drug research and development. GlaxoSmithKline itself had a tough 2012 but is looking at a comeback as it readies new drugs including a cancer therapeutic vaccine and a statin treatment. Moreover, the shares of GSK have not been immune to the global economic recession, and are only now returning to previous high values, as you can see from the below monthly price chart: –
The shares of a pharmaceutical company may be affected by various news items, such as approval of drug trials, or reports that hoped-for drugs were ineffective. Thus you can see sudden moves in price depending on the latest reports. In common with many others of their size, GSK is not dependent on particular drugs or operations, but is constantly evolving, making acquisitions and disposals when parts of the company do not fulfil expectations, or are in areas of lessening interest. In fact, GSK disposed of its interests in Quest Diagnostics Inc. and of its brands in the US in 2011 and 2012.
How to Spread Bet on GlaxoSmithKline Shares: Rolling Daily
GlaxoSmithKline is a major pharmaceutical company, and provided it keeps innovating and producing new drugs, it should see steady growth in the long run. However, it is volatile in the short term, and can be spread bet either short or long, depending on the current technical analysis. The current spread betting quotation for GSK is 1442.1 – 1445.4 for a rolling daily bet.
If you want to place a trade that the price will increase, your long bet would go on at the price of 1445.4 for your chosen stake of, say, £3 per point. You should never place a spread bet without a good reason, usually coming from a review of the technical analysis, as otherwise you are just gambling. If the price goes up as you expect, you might close your trade and take your profit when it reaches 1496.3 – 1499.6. Your spread bet has gained 1496.3 minus 1445.4 points, which is 50.9 points. At £3 per point, your profit is £152.70. Set against that, your spread betting provider may have applied a small charge each evening when the bet was rolled over, but this is usually not significant.
With the best of analysis, you will still find that some of your spread bets are losers. Say the price dropped to 1401.6 – 1404.9, you might choose to close your trade and accept your loss before it became any greater. The number of points you have lost is 1445.4-1401.6, which is 43.8 points, and that costs you £131.40.
Many spread traders use stop loss orders, placing them at the same time as they take out the bet, so that the spread betting company automatically closes a losing bet for them once it reaches a certain point. Perhaps if you had done this, your trade may have closed at 1423.2 – 1426.5. In this case, you would have lost 1445.4-1423.2, which is 22.2 points. This would have kept your losses down to £66.60.
GlaxoSmithKline Futures
Some spread betters prefer to wager on the futures based shares prices. Although there is usually a larger spread on these, which can cost you profit, there are no rollover fees or other charges up until the expiration date. The current price for the GSK far quarter future is 1446.7 – 1459.2. If you think that the price will go down, you could place a short or sell bet with a stake of £6 per point at the price of 1446.7.
Over the next few weeks or months, if you are correct the price could go down to 1356.9 – 1368.2, and you could close your trade to collect your winnings. You can work out how much you won from the number of points and your stake. You made 1446.7 less 1368.2 points, which is 78.5 points. For your chosen stake, you would have won £471.
Of course, quite often the market will not move in your direction, and you will be faced with closing your spread bet for a loss. Perhaps the price increased after you made your bet, and you chose to exit it when the quote was 1502.0 – 1512.6. In this case you have lost 1512.6-1446.7 points, which is 65.9 points, and this would have cost you £395.40.
The key to making a profit on the financial markets is to limit your losses and to make the most of your gains. Many traders use the stop loss order to close their trade if the price goes in the wrong direction, as they do not have to be watching the prices all the time, the spread betting company will end the trade for them. If you had done this, perhaps your losing trade would close at 1476.2 – 1488.3. Taking the starting price of 1446.7 away from 1488.3, you have lost 41.6 points. In this case your total loss was £249.60.
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