Spread Betting BG Group
The BG Group [BG.] has only been in existence since 1997, but is a major company, the eighth largest company on the FTSE, with a capitalization of nearly £50 billion. It came from British Gas, but its business is now far wider than simply in the UK. BG Group is involved in exploration and extraction of natural gas, liquefied natural gas, and even oil. It is the largest supplier of liquefied natural gas to the United States.
Its headquarters are in Reading, on the M4 west of London, but because it is in the global energy market, more than half of its employees are located outside the UK. It operates in 27 countries including North and South America, Asia, Africa, and Europe, and because of its heritage can rightly claim expertise in all aspects of gas supply.
The path has not been easy, however, with Conoco Phillips out bidding the BG Group for Origin Energy, Australia’s largest coal seam gas producer, in 2008. Nonetheless, the BG group has pursued producing gas from coal deposits which it sees as an important wave of the future in energy supply.
In recent years, the focus has turned to natural gas and away from oil, which seems to be more politically sensitive. Even though gas is a fossil fuel, and in common with every other fuel produces carbon dioxide when burnt, renewable energy resources are unlikely to upset the major position of natural gas in the energy chain, including electricity production from gas.
Because of the fundamental role of energy in modern society, the BG Group has seen a fairly steady rise in its share price from below 400 (£4 per share) in 2005 to a high of nearly 1600 recently. There have been fluctuations, particularly during the global economic crisis a few years ago, but overall growth has been steady and strong.
BG’s stock price has been under pressure lately due to the spirraling costs of building its coal and liquefied natural gas project in Australia which has already reached costs of $20.4 billion, leading to speculators that that the company might need a rights issue to bolster its capital.
How to Spread Bet on Shares: BG Group Rolling Daily
The current price for a rolling daily spread bet on the BG Group is 1389.6 – 1392.4. The BG Group is involved in the energy industry, principally natural gas, and has been performing strongly over the past few years. If you think that the price will continue to rise, you could place a long spread bet, or buy bet, at the price of 1392.4, staking say £5 per point.
If you are right, and the price continues to go up, you may choose to close the bet and collect your winnings when the quote rises to 1497.2 – 1500.0. This is how you would work out how much you won.
Your bet was placed at 1392.4, and closed at 1497.2. That means you have gained the difference, which is 104.8 points. For your chosen stake, this amounts to £524.
It is a fact of trading and spread betting that many of the trades will not work out as you had planned, and it is important to keep your losses small. Say the price had dropped to 1305.2 – 1308.0, and you closed the spreadbet to minimize your losses. In this case, you lost 1392.4-1305.2, which is 87.2 points. That amounts to £436.
It is a good idea to place a stop loss order when you take out a bet. This will automatically close the spread trade if it goes against you by a certain amount, and will help to keep your losses down if you cannot be watching the market all the time. Say in this case you have a stoploss order, which closed your bet when it fell to 1353.7 – 1356.5.
Using a stoploss order, you have lost 1392.4 less 1353.7 points, or 38.7 points. Your total loss has being kept down to £193.50 by having a stoploss order.
BG Group Futures Betting
Most spread betting providers will allow you to bet on quarterly future prices of stocks. IG Index currently quote a price of 1396.4 – 1408.4 for the furthest quarter, nine months away. Some spread betters prefer betting on futures pricing as there is no daily adjustment to the account, as you get with a rolling daily bets. However, the spread is usually larger, so you need to take a medium-term view to make them worthwhile.
If you think that BG Group is going to go down in value, you could place a sell or short bet at 1396.4, staking say £5 per point. Say you are correct, and the price goes down to 1315.7 – 1326.5, at which point you decide to collect your winnings. The total you have gained is from the opening price of 1396.4 to the closing price of 1326.5, which is 69.9 points. For the size of bet you placed, this is worth £349.50.
Perhaps you were wrong, and the price goes up after you placed your bet. It might go up to 1461.3 – 1472.1, and you decide to close your bet and cut your losses. This time you have lost the number of points between 1472.1 and 1396.4, the opening price, which is 75.7 points. That would have cost you £378.50, and you can see how the wider spread has worked against you.
As a third example of an outcome from this bet, consider that you might have placed a stop loss order when you opened the spread bet. This would have automatically closed your bet and minimized your losses when the price went against you. Say your stop loss order was placed so that it closed your bet when it reached 1432.9 – 1442.5.
For this case, your bet was opened at 1396.4, and closed at 1442.5. That means you lost 46.1 points. For your chosen stake of £5 per point, you have lost £230.50.
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