Glencore International Fundamentals
Glencore International has some fascinating roots. It was only listed on the London Stock Exchange in May 2011, with a secondary listing on the Hong Kong Stock Exchange, but it is in the FTSE 100, the hundred largest companies. Previously to that, it was a privately held company, and it is headquartered in Switzerland with a registered office in Jersey.
Glencore is the world’s largest commodity trading company, and integrates these activities with commodity production, having interest in sourcing, refining, transporting, and storage of metals, energy products, and agricultural commodities. It is the world’s largest supplier of many metals and minerals, the world’s largest supplier of steam coal, and a leading supplier of crude oil, sugar, and grain.
The company operates around the world and was formed in 1974 with a management buyout of Marc Rich and Co. Marc Rich was a billionaire commodity trader charged with various wrongdoings in the US, but pardoned by Pres. Bill Clinton in 2001. The company got into financial trouble in 1994, and Marc Rich was forced to sell his majority shareholding.
The troubling history of the company continued in 2005, when proceeds of an oil sale associated with the Republic of Congo were seized as fraudulent. With a company of this size, and so many dealings taking place, it seems almost inevitable that some will be questioned. The latest news for Glencore is that they have made an offer to buy Xstrata PLC in what would be called a merger and constitutes the largest ever mining takeover, which if approved would create a behemoth company with sales of more than $200 billion in 2012.
From a spread betting point of view, this is a very interesting entity to be involved with. Periodic “lapses of judgement” or questionable practices will impact the share price, on top of the marked volatility that you can already expect from the mining sector. Be careful to protect your assets if you become involved in trading on this company.
How to Spread Bet on Glencore Shares: Rolling Daily
The daily chart of Glencore International prices shows the amount of volatility that you can expect if you choose to spread bet on this stock.
The current rolling daily price is 406.89 – 407.86. Should you think that the stock is due for a downturn, you could place a sell or short bet for £20 per point at a price of 406.89. If you are correct, you might see the price sink down to 376.52 – 377.49, and decide to take your profit. Your entry price was 406.89, and as this is a down bet, the exit price would be the buying price of 377.49. That means you have gained 406.89-377.49 points, which is 29.4 points. For your chosen stake, this amounts to a profit of £588.
Of course, frequently the price will move against you after you place your spread bet. Say the price went up to 428.76 – 429.73, and you decided to accept your loss and move on to other things. As before, your starting price was 406.89, but this time the trade was exited at 429.73, giving a loss of 22.84 points. This works out to £456.80 lost.
It cannot be stated too often that the key to profitable spread betting is to keep your losses small. After all, if you lose your trading capital then you will not be able to make any more bets. One method used by many spread betters is to set a stop loss order on any bet that is made, automatically closing the position before the price goes too far against you. If you had done that in this situation, you might find that the trade was closed at 418.63 – 419.60. Your loss in this case would be 419.60 less 406.89, a total of 12.71 points. At £20 per point, this amounts to £254.20.
Glencore Futures Based Bet
Glencore International is a commodity and mining company, and its share price is fairly volatile. The futures based spread bet is based on the shares futures contract values, so it does not always reflect the spread betting interest. The current quotation for the far quarter futures based spread bet is 409.10 – 414.29.
If you believe that the price of Glencore shares will increase in the coming weeks and months, then you may wish to place a futures based bet for, perhaps, £12 per point. If you are correct, you might find that the price rises to 430.63 – 435.26, and you can close your trade and collect your winnings. You opened the spread bet at a price of 414.29, and a long bet closes on the lower (selling) price of 430.63, so you have made 16.34 points. Multiplying this by your stake of £12 per point, you have a profit of £196.08.
However, frequently the markets will not move as you expect them to, and you will find that you have to close a losing position. Perhaps the price dropped to 397.03 – 401.56, and you decided to close your trade to cut your losses. The bet closed at 397.03, so with an opening price of 414.29 you have lost a total of 17.26 points. Your loss totals £207.12.
In this example, you can see how much impact the large spread between buying and selling prices has on your account. The spread is usually larger with futures based bets than with rolling daily, so you need to consider carefully which type of bet to make to suit your strategies. One method that usually keeps down your losses is to set up a stoploss order when you take out your initial bet, as this will close a losing position for you even if you’re not watching the markets. In this case, it might have closed the position for you when it fell to 404.32 – 408.61. The bet was placed at 414.29, and closed at 404.32, a difference of 9.97 points. This amounts to a loss of £119.64.
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