Spread Bet on Rexam Shares | Trade Rexam
Rexam is the world’s largest manufacturer of aluminium beverage cans, and also produces plastic packaging for cosmetics, food, and pharmaceuticals. It was founded as Bowater’s in 1881, selling paper. The name was changed in 1995 to Rexam, and the company refocused on consumer packaging. It produces 45% of all beverage cans sold in Europe, 68% of all those sold in South America, and even in North America it supplies 22% of the market.
Most of the company’s products are sold directly to major businesses, such as PepsiCo, Coca-Cola, and Procter and Gamble. As such its business is dependent on a few key large contracts – the top 10 customers account for about 68% of sales. However in the aluminium can industry it is common for contracts to be negotiated a long way in advance, so there is a certain security in the contracts held. Another factor of profitability is the price of aluminium, changes in which only half of its contracts allow to be passed on to the buyer.
You can see from this monthly price chart that Rexam’s shares were affected similarly to many other companies by the global economic crisis, slumping in value from 2007 to 2009, and with a recovery that has not yet reached previous highs. As Rexam got out of the glass container sector in 2005, it is sensitive to the whims of consumer demand. For instance if consumers drink more wine and less beer, that favours the glass industry and is against the aluminium producers, such as Rexam. On the other hand, an increase in beer consumption favours the stock price.
When you look at the chart, you can see reasonable volatility, and therefore this is a stock that spread betters would find useful to add to their watch list. The monthly price chart shows reasonable adherence to technical analysis principles, and this stock is worth a look.
Spread Betting Rexam Rolling Daily
The main business of Rexam is providing aluminium cans to other businesses, such as Pepsi-Cola, Coca-Cola, and Heineken. As such, it is a stable operation with some dependency on market forces. The current quotation for a rolling daily bet is 406.19 – 407.11. If you thought that the stock was going to increase in value, you could place a long bet for £8.50 per point.
First, assume the stock goes up as you hoped, and when it reaches a level of 448.62 – 449.50, you decide to close your spread trade and collect your winnings. To work out how much you have won, first you look at the prices involved. Your long bet was opened at 407.11, and it closed at 448.62. That means you have won 41.51 points, the difference. At £8.50 per point, that amounts to £352.83. With the rolling daily bet, you may have been charged a small amount each evening when the bet was rolled over, but usually this is not very large.
On the other hand, the market might have dropped after you placed your spread bet, and you may be faced with closing your spread trade for a loss when it reaches 371.52 – 372.44. Your spread trade opened at 407.11, as before, but this time it closed at 371.52 for a loss of 35.59 points. If you work that out, you have lost £302.51. Once again, your account may also have been charged each day that the bet was rolled over.
A stop loss order can take some of the work out of closing a losing trade. It closes your bet if a certain level of loss is reached. If you had used one of these, your losing bet might have been closed more quickly, at say 385.92 – 386.76. 407.11 minus 385.92 is 21.19 points, and that would have cost you £180.11.
Rexam Futures Based Spread Bet
When you decide to place a futures style bet, you have a choice of (usually) three different dates – the near quarter, the mid-quarter, and the far quarter. These represent the bet expiration dates, and usually the further out the expiration, the larger the spread between the buying and selling prices. The current quote for the far quarter on Rexam is 407.49 – 412.62.
Say you place a short bet on the far quarter price, wagering that the value will fall at least before the expiration date. You might stake £11 per point. If the price falls to 362.13 – 367.15, you could close the bet and collect your winnings. Even though this is a futures style bet, you can close it at any time, even the next day.
Your sell bet was placed at 407.49, and it was closed at 362.13. That means you made the difference, which is 45.36 points. With your stake of £11 per point, you would have made £498.96.
Any time you bet on the financial markets, you must realize that your bet could fail and cause you to lose some funds. Say the price went up to 443.51 – 448.33, and you decide to close your bet and cut your losses. Once again, your bet was placed at 407.49, but this time it closed at 448.33. 448.33 minus 407.49 is 40.84 points, which amounts to a loss of £449.24.
Any time that your bet runs into a loss, it can help if you had set a stop loss order when you opened the bet. This requires your bet to be closed once (if) it reaches a certain amount of loss. Say you had a stoploss order on this bet, and that made it close at 423.68 – 428.21. This time you have lost from 407.49 up to 428.21, a total of 20.72 points. For your chosen stake, this would have cost you £227.92.
Join the discussion