Spread Bet on Legal and General Shares
Legal & General, as the group is commonly known, is a multinational financial services company that is headquartered in London. Most people have heard of it, but may not appreciate the full extent of the scope of its services. It manages nearly £400 million in assets for over 3000 clients. One of its primary claims is investment expertise, including investing in shares, fixed income, property, and cash. It manages index funds and investments in the global fixed income markets. It also works in defined contribution plans, and has a strong history of repeat clients.
Although it is based in England, it has operations in Egypt, France, Germany, India, the Netherlands, the Gulf, and the United States. It was formed in 1836, when it was called the New Law Life Insurance Society and was restricted to those in the legal profession. When it changed its name to Legal & General Life, it was to reflect the fact that policies were available to the general public. The interests in the US were established when it took on Metropolitan Life Assurance Company of New York in the 1930s, and cemented when it bought Government Employee Life Insurance in the 1980s.
There were a variety of mergers and disposals in the last couple of decades. In 1999, Legal & General tried to merge with National Westminster Bank, and in 2003 the company sold off its bank and mortgage services to Northern Rock. Interestingly, though it is hardly ever mentioned, Legal & General has financial interests in one of the largest estate agencies in the UK. It is not branded as Legal & General, but appears as several regional brands, such as Ellis & Co., Parkers, etc.
Because of its interests, the shares of the company took a distinct downturn in the global economic crisis, and are barely recovering now. However, L & G looks well placed to take advantage of any improving economic climate.
Dominic’s take on Legal and General Shares: February 2013
How to Spread Bet on Legal & General Group Shares: Rolling Daily
The share price for Legal & General is much lower than its peak, which occurred in 2007 just before the global economic crisis, as you can see from the monthly price chart below.
However it has been making steady improvement, with fluctuations as can be seen at the price currently testing the SMA (20) average. The current quotation for a rolling daily bet is 108.49 – 108.71.
If you think that it is going to go up, you could place a long spreadbet at 108.71, staking for instance £8 per point. The monthly price range has tended to be about 15 to 20 points, making this a relatively modest bet. Suppose you are correct, and the price goes up to 125.63 – 125.85, at which point you decide to close your bet and collect your profit. The starting price for the spread bet was 108.71, and the closing price was 125.63, giving a point difference of 16.92. Multiplying this by your stake, you find that you have won £135.36.
Of course you may not be correct, and the price could go down further putting you into a losing situation. At some stage you would have to accept that loss before it got any greater, and say that happens when it reaches 95.27 – 95.49. Working out how much you have lost, the closing price of your bet would be 95.27, which taken away from the starting price of 108.71 means that you have lost 13.44 points. At your chosen stake, this would cost you £107.52.
As an alternative, you might have set a stop loss order when you took out the original spread bet, and this would automatically close your bet when the price went down by an amount that you chose. Say this triggered when the price went down to 98.69 – 98.91. The stoploss order would have taken you out of your losing trade with a loss of 108.71 minus 98.69 points, which is 10.02 points. Multiplying it by your stake, you have lost £80.16.
Legal & General Group Futures Based Spread Bet
Looking at the monthly chart (below) you may decide that the midterm outlook for Legal & General is bleak, and be tempted to place a short or sell bet expecting the price to fall in the coming weeks or months. The current spread betting quote for the far quarter is 108.69 – 110.00. Your short spread bet would be placed at 108.69, and could be for a value of, say, £12 per point.
Assuming the price continues to go down, and quite possibly reaches the lower Bollinger Band, you might close this bet for a win when the price is quoted at 91.63 – 92.75. That means that the price has fallen from 108.69 to 92.75, a gain for your short bet of 15.94 points. At £12 per point, you have won £191.28.
Unfortunately, it is not possible to predict the financial markets accurately, and the price might reversed and gone back up, leaving you with a losing situation. Say when it reaches 120.26 – 121.62 you decide to close the bet and accept your loss. The number of points you have lost is 121.62 minus 108.69, a total of 12.93 points. For your chosen stake, this would cost you £155.16.
Because you have to be following the prices closely to close your losing bet in a timely manner, many spread traders decide to use stop loss orders, which require your spread betting company to close the bet when it reaches a certain level of loss. If you had used one in this case, you might have found that the order would trigger and you would be out of the bet at 116.32 – 117.76. In this case you would have lost 117.76 less 108.69, a total of 9.07 points. Using this technique, you would have kept your losses down to £108.84.
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