Spread Betting Burberry Group PLC
Burberry Group PLC [BRBY.L] is a clothing manufacturer well known to UK customers. Unsurprisingly, the luxury fashion brand is also a very popular spread betting market amongst traders and investors. The company was founded in 1856, and from the start concentrated on outdoor clothing. The name has varied from Burberry to Burberrys and back to Burberry in 1999, and the company was floated on the stock exchange in 2002. It is been very successful in modern times, with the gabardine trench coat being a notable feature. However, the range of products available has expanded significantly and now includes a whole range of clothing accessories, including fragrances, handbags, shoes, cufflinks and even sunglasses.
The company has a diverse network of retail outlets and an extensive web presence. It has expanded to quite a number of other countries maintaining its luxury image. There have been some notable achievements, such as being the outfitters for Amundsen, the first man to reach the South Pole, and Shackleton who crossed the Antarctica. Burberry was even commissioned by the War Office in 1914, and the result of this was the production of the trench coat. Notably, Burberry coats have had a checked pattern lining since the 1920s, when it was created.
In the luxury sector, Burberry competes with such names as Prada and Gucci. Burberry operates in two modes, one of them to the retail and wholesale market, and the other in licensing, which has met with mixed success in different countries. Despite the long heritage, Burberry has managed to capture the imagination and adapt to the markets over the years, which means it is still competitive 150 years after its founding.
The global economic crisis of 2008 hit hard with the share price going down below 200 (£2) per share, but it has risen as high as 1600 recently, and seems to be testing this resistance level. Current price is around 1500. The share price has been variable in past months, but the volatility of each trading period is not great, and the price moves should prove relatively easy to follow. Given the trading updates it seems there is still a demand for very highly priced brands and the Burberry name carries a lot of pricing power . Burberry also sit on a big cash pile as well which makes the PE a bit more bearable.
Spread Betting: Burberry Rolling Daily
Burberry, the luxury clothing and accessories store, presents an interesting price chart with overall steady growth but many fluctuations, which can be a delight to the spread better to knows how to take advantage of them. The current quotation for a rolling daily bet is 1495.5 – 1499.5. It currently looks as though it is going into decline (see chart below) so you might decide to place a sell bet for £5 per point.
The MACD is signalling a sell, the price is trading in the lower half of the Bollinger Bands.
Suppose you are correct, and the price does deteriorate to a level of 1395.6 – 1399.6. You might choose to take your profit at this level, as it appears that there is a strong support found there in the beginning of March. You went short at a price of 1495.5, and closed the trade at 1399.6, giving you a gain of 95.9 points. With a stake of £5 per point, this is a win of £479.50.
On the other hand, the price might react in the same way as it did in the beginning of March, with the MACD turning back and the price breaking out to new highs. If the price quote goes up to 1595.2 – 1599.2, then you might close the spread bet for a loss and move on. This time the point difference is 1599.2-1495.5, which is 103.7 points and costs you £518.50.
You could have chosen to place a stop loss order when you opened the trade, and this could be at the upper Bollinger band level of 1570, as if this is exceeded your spread bet has clearly gone wrong. Say your stop loss took you out of the spread trade at a price of 1571.0 – 1575.0. In this case you have lost 1575.0-1495.5, which is 79.5 points. Your loss has been kept down to £397.50.
Burberry Futures Betting
Over the next few months, you think that it looks like Burberry will continue in an up-trend, so you decide to place a futures style spread bet on the furthest (far) quarter, which is currently priced at 1501.8 – 1515.8, and expires in eight months. You wager £6.50 per point on the buy bet.
Say the trend continues, as you expect, after a few months you may choose to close your spread bet and collect your winnings when the price is 1732.6 – 1741.4. As you took out a long bet, the opening price was 1515.8 and the closing price was 1732.6. That means you gained 216.8 points. Multiplying by your stake, you have won a total of £1409.20.
Of course, prices can go down as well as up, and at a certain level you may need to close a losing bet and accept your losses, rather than risking that the losses get larger. Say you decide to close for a loss when the quote is 1392.1 – 1404.6. Even though it is a futures based spread bet, you can close it at any time up to the expiry date.
In this case the bet went on at 1515.8, and was closed at 1392.1, which means you lost 123.7 points. This spread bet cost you £804.05.
An alternative way of closing a losing trade, which is often used by experienced traders, is to place a stop loss order when you make the initial spread trade. As this automatically closes the wager when the losses reach a certain level, it saves you keeping a watchful eye on the price all day long. Say this operated when the price reached 1441.6 – 1450.2, and closed your spread bet.
This time your starting price was 1515.8, and the closing price was 1441.6, a difference of 74.2 points. At £6.50 per point your loss was £482.30.
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