Trading John Wood Group PLC
John Wood Group PLC, which is also known simply as the Wood Group [LON: WG], is an international oil and gas services company based in Aberdeen, Scotland. In the energy sector, its volatility makes it interesting to anyone spread betting. The company has only been in existence since 1982, when it sprung away from a Scottish fishing company, and it went public even more recently, in 2002. It is listed on the LSE and is a constituent of the FTSE 100 Index.
You can see from this monthly price chart that it was heavily hit during the global economic downturn (along with many other companies), but has fully recovered and is making great gains to record levels.
Its primary business is providing services to the oil, gas, and power industries. These services include studies, engineering, project management, and control system advice. It is split into three logical groups, engineering, production services network (PSN), and gas turbine services (GTS).
Wood Group has formed several strategic alliances, as well as being involved in acquisitions. For instance, it works with the Rolls-Royce on turbines and gas generators, Pratt & Whitney on gas turbines, and TransCanada Turbines on its products. Recent acquisitions include Production Services Network, Duval, and Mitchells Oil Field Services, while it divested itself of its Well Support Division to GE in the United States in 2011.
Looking at the monthly price chart above, you can see that Wood Group has been on a fairly good uptrend for a few years, and that the MACD has been a reasonable starting point for an indicator. Of course, you would not spread bet on this time scale but would instead look at the daily or perhaps four hourly charts in order to time your entries and exits. Because of the nature of the industry that this company is in, you should take particular care to avoid losses, and the general recommendation would be to look for long opportunities so that you can trade with the prevailing trend.
John Wood Rolling Daily
The current price for a rolling daily spread bet on the Wood Group is 852.1 – 853.9. By inspection, you can see that the daily fluctuations are about 20 points, so you decide to stake £2.50 per point on your belief that the current uptrend will continue. Your buy bet is placed at 853.9.
If it works out for you, and the price continues upwards, you might decide to close your bet and collect your winnings when the price has reached 973.6 – 975.4. The bet will close at the selling price of 973.6. Working out how much you have gained, 973.6 minus 853.9 works out to 119.7 points. With a bet of £2.50 per point, that means you have won £299.25. There may have been small charges to your account each evening when the bet was rolled over, but these are usually not significant.
No matter how convinced you are that you are right, you must always allow that the markets can prove you wrong. Say the price dropped to 795.0 – 796.8, and you decided that you needed to close the spreadbet to prevent further loss. The bet opened at 853.9, and you closed it at 795.0, which is a point difference of 58.9. Because the price went down, this is a loss to you of 58.9 times £2.50, your stake, which works out to £147.25.
An alternative way to quit a losing spread bet is to place a stop loss order when you first open the bet. This requires your spread betting provider to close the trade at a certain level of loss, whether or not you are watching the market. Therefore this can often save you some money. Say in this case it closed the bet once the price reached 809.2 – 811.0. The opening price was 853.9 as before, but the bet closed at 809.2. This time you have lost 44.7 points, which means a loss of £111.75.
John Wood Futures Based Bet
Sometimes you have a situation where you expect the price to change, but are not sure if it will happen next week or next month. If you use a futures based spread bet, then you do not have to worry about continued maintenance charges as you do with a rolling bet, and can hold the bet open without any price adjustments, right up to the expiry date.
The current quote for the Wood Group for the far quarter is 853.6 – 863.9. Say you open a long spread trading position at 863.9 with a stake of £1 per point. Perhaps the price will go up to 1037.2 – 1045.8, and you will decide to take your winnings. Your bet was opened at 863.9. You closed it when the selling price was 1037.2. That means that you have gained 1037.2 minus 863.9, which is 173.3 points. For your chosen stake, this amounts to a win of £173.30.
Inevitably, some of your bets will not work out, and you will have to close them for a loss. Say the price on this one dropped to 727.5 – 738.2, and you decided to cut your losses. You closed the bet at 727.5, having opened it at 863.9. That means you lost the difference in points, 136.4. This would cost you £136.40.
Many spread betters use a stop loss order to curtail their losing trades. The chief advantage of a stop loss order is that you do not need to be watching the market for your losing bet to be closed, as your spread betting provider will do so automatically at the level you set. Usually this will result in a lower loss. Say your bet was closed with a stoploss order when the price dropped to 753.2 – 762.6. The bet opened at 863.9, and it closed at 753.2 for a loss of 110.7 points. For your chosen size of stake, this would amount to £110.70 lost.
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