Spread Betting GKN | Trading GKN Shares
If you are a car buff, and into working on cars yourself, you may know GKN as an auto parts supplier. It is an engineering company with a long history, and half of its current revenue comes from the “Driveline” division which manufactures drive shafts, constant velocity joints, etc. for many carmakers.
It used to be called Guest, Keen and Nettlefolds, but that was just the latest in a long line of names. The original engineering company was called down Dowlais Ironworks, and was founded in Wales. John Guest was the manager from 1767, and was succeeded by his son. Those were the days of the Industrial Revolution, and the company thrived.
In 1900, Dowlais merged with Arthur Keen’s Nut and Bolt Company, forming Guest, Keen and Co. Limited. Nettlefold’s, a fastener company, was added two years later when the full name was established. Through acquisition, GKN became proficient at manufacturing crankshafts, connecting rods, and other parts, and supplied steel wheels to many automotive manufacturers of the time, replacing wooden wheels.
Acquisitions again drove GKN, this time in the direction of constant velocity joints which had had little use until the exploitation of front-wheel-drive in the 1970s and 1980s. Its name was officially changed to GKN in the 1980s, and the company diversified into other businesses such as aerospace. Late in the 20th century, the company also turned to powder metallurgy, producing sintered metals.
Despite all this diversification, the last few years have not been good for GKN. The peak price of 287 in June 2007 has never been reached again, and there was a low of 36 in March 2009. Since that time there has been fairly steady growth up to the current level of about 205. As a parts supplier, GKN is very dependent on the health of other industries generating a requirement for parts, and this means that there are good opportunities to profit from spread betting both for and against this stock.
How to Spread Bet on GKN Shares: Rolling Daily
The engineering company GKN is probably best known for its auto part business, but has also developed credentials in the aerospace industry. Its growth has been spasmodic in recent times, allowing you to profit from up or down spread bets. Here is a recent daily chart: –
The price seems to be ranging between 190 and 215, and on this chart there is no obvious direction to bet. The current price for a rolling daily bet is 204.89 – 205.31. If you want to take a long position, you could place a buy bet for £18 per point, and this would be at 205.31.
If this spread bet works out, you might find that the price goes up to 214.63 – 215.05, and decide to take your profits. You close the bet at 214.63, the selling price, and work out how much you have won. Taking one number away from the other, you find that you have gained 214.63-205.31 equals 9.32 points, and when you multiply this by your stake of £18 per point your total winnings work out to £167.76.
Of course, the price might have gone the other way and you would have to close your bet for a loss. Say it drops to 195.67 – 196.11, and you accept your loss and close your spread trade. This time the number of points is from 205.31 to 195.67, which is 9.64 points, and that would cost you £173.52 for the current spread bet.
Another way to close a losing trade is to place a stop loss order when you make the spread bet. In this case you might have said that you believe the trade is going to fail if the price drops below 200, and your spread betting broker would close your spread bet for you at, perhaps, 199.32 – 199.66. In this case, you would have lost 205.31-199.32, which is 5.99 points, which works out to £107.82.
GKN Futures
GKN is an engineering company that has had varied results in recent years. Its current spread betting quote for the near quarter is 205.01 – 205.83. If you think that the next move will be downward, you could place a sell bet at 205.01 with a stake of, say, £12 per point.
Perhaps the market drops and you are in a winning position. The price might go down to 190.26 – 191.02, and you could close your spread trade and count your profit. You work that out by first taking the difference in points (205.01 minus 191.02), which is 13.99 points, multiplied by your stake. You have won a total of £167.88.
One of the early lessons which you learn when you trade on the financial markets is that nothing is certain, and as hard as you try to find the right bets, you will have a fair proportion of losers. If this bet had lost, and the quote had gone up to 215.62 – 216.40, you might have considered closing your bet, to prevent any further losses. The number of points you have lost is 216.40 less 205.01, or 11.39 points. This is a financial loss of £136.68.
What many traders and spread betters do is take out a stop loss order when they place their original order. This tells the broker to close the spread bet after the price reaches a certain (losing) level, and saves having to watch the market all the time to keep down your losses, one of the secrets of a winning trader. If you had done this, the bet might have closed at 211.63 – 212.35. The opening price was 205.01, as before, and the closing price was 212.35, for a point difference of 7.34. At your chosen stake, this would have cost you £88.08.
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