Spread Betting on CRH’s Share Price
CRH is an Irish company, listed on the Irish Stock Exchange and the New York Stock Exchange, but with its primary stock listing on the London Stock Exchange. It manufactures and distributes building materials, and operates internationally. In its present form, the company has been in existence since 1970, when it was brought into being by a merger of Cement Limited and Roadstone Limited. The name CRH is an abbreviation of Cement Roadstone Holdings.
Building has not been a good industry to be associated with recently, and CRH’s current stock price at around 1200 is lower than it has been for many years. In fact, in 2007 the price topped 3400. However, the price chart shows a range of up and downs between about 1000 and 1700 in the last couple of years, and for the spread better who’s comfortable taking both long and short positions, such movement represents potential profit.
CRH PLC is organized into six business areas. These include Materials, Products, and Distribution, and these are both in Europe and in the Americas. The Materials divisions produce and sell primary materials such as cement, ready mix concrete, asphalt, etc. The role of the Products divisions is to produce and sell structural and architectural concrete items, glass products, and sundry construction accessories. The Distribution services deal with do-it-yourself stores, builders agents, etc.
Recent developments have included buying a cement factory in China in 2006, buying four US building material companies in 2007, and buying a 50% stake in an Indian cement company in 2008. It is apparent that the company has every intention of growing internationally, and perhaps taking advantage of the depressed building sector to allow further expansion. Some of the price movement will be news driven, both from construction sector and company specific quarters, and it is important to protect your principal during times of high volatility.
Spread Bet on CRH: Rolling Daily
CRH is a materials company in the building sector, and experienced a large drop in share price during the global economic crisis. It is now steadily growing, but with volatility. The current rolling daily spread betting price is 1209.0 – 1215.0. If you think the price is due for a retracement, and therefore want to take a short position, you might decide to wager £7 per point on a sell bet at the price of 1209.0.
If you are correct, and the price falls, then you could close your trade and take your profit when the quote goes down to 1089.6 – 1095.6. Then you can work out how much you have won by figuring out the number of points gained. 1209.0 less 1095.6 is 113.4 points. With a £7 per point bet that works out to £793.80 profit.
Of course, no one is right all the time, and the price of your spread bet may have gone the other way, causing you to lose. If it went up to 1293.0 – 1299.0, you might close the trade and accept your loss. The number of points you lost is 1299.0 less 1209.0, which is 90.0 points. Therefore you would have lost £630.
It is important that you control your losses when you are spread betting, as this is key to coming out on top in the long run. One way you can avoid being caught out by the price moving while you are not watching the market is by having a stop loss order with your spread betting company. This tells your broker to close your trade if the losses rise to a certain level. In this case, you might have placed a stop loss order so that it closed the trade for you when the price reached 1265.4 – 1271.4. This way you would have lost 1271.4-1209.0 points, which is 62.4 points, which for your size of wager amounts to losses of £436.80.
CRH Futures
Although you will generally find that the spreads between the prices are greater on future style bets than on a rolling daily bets, if your trading strategy requires you to look several months in the future, then it will usually work out cheaper to use this type of spread bet. The current pricing for the far quarter (currently eight months away) for CRH plc is 1215.6 – 1227.6. If you want to bet on the price increasing, you could wager £3.50 per point on a long bet at 1227.6.
Over the weeks you may see the price creep up until finally it reaches your target level of 1307.2 – 1318.5, when you close the trade to collect your winnings. Your long bet has gone all the way from 1227.6 up to 1307.2, which means you have won 79.6 points. Multiplying that by your stake, your profit is £278.60.
Financial trading is an unpredictable business, and you may find that the price turns against you. If this is the case, it may reach a level where you feel you have to close the bet to avoid any further loss. Say this happened in this case, with the price falling to 1171.2 – 1182.6. When you close the trade you can figure out how much you have lost. 1227.6 less 1171.2 gives you 56.4 points, multiplied by £3.50 to give a total loss of £197.40.
Many traders recommend that you place a stop loss order with your spread betting company at the same time as you make the original bet. This is not unlucky, but simply a good practice, that ensures your spread trade will be closed whether or not you’re watching the market if the losses become large. Say this closes your spread bet at 1189.6 – 1200.4. This time you have lost 1227.6-1189.4, which is 38.2 points. For your given level of wager, your loss is £133.70.
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