Spread Betting Hargreaves Lansdown
Hargreaves Lansdown is a relatively young company which provides financial services including investment management to private investors in the UK. One of its advantages is that it centralizes all the different investment holdings, such as unit trusts, shares, bonds, etc. in one place, and provides compiled valuation reports to sum up the investor’s position. It is also active in providing services to companies with respect to group pension schemes, and has a range of managed unit trusts which invest in underlying funds.
It is based in Bristol, and was started in 1981, but first listed on the London Stock Exchange in 2007. One of the founders, Lansdown, sold nearly £50 million of stock in 2009 to help build Bristol City football club’s new stadium. The company is responsible for more than £20 billion in assets. Hargreaves Lansdown products are generally issued under the Vantage brand. The company is just big enough to slip into the top 100 on the FTSE.
The company has had impressive figures since it went public, with net profits growing at about 40% per year in the last five years, and this has been better than many similar financial companies during a period when the industry as a whole was suffering. However, the dividend yield has been less than 3%, which is not remarkable. This and the fact that there is a price to earnings ratio much greater than 20 suggests that the shares may be overvalued, despite what appears to be continuing enthusiasm and market sentiment.
Given the fickleness of the financial markets, it would probably only take one piece of bad news or a target missed for the market to take a different view, and for the shares to return to a more reasonable level. If you can anticipate such a move, obviously it has the potential to be highly profitable, but in the meantime with the positive outlook, despite a temporary setback in the beginning of 2012, it is no time to be holding a short position in expectation.
How to Spread Bet on Hargreaves Lansdown Shares: Rolling Daily
Hargreaves Lansdown is a financial services firm which has had remarkable success in the last few years. Some experts feel that this may presage a correction, while others see the sentiment as continuing. The current price for a rolling daily bet is 516.5 – 517.5. Suppose that you see that the uptrend will continue in the short term, you may choose to place a long bet on this stock at a price of £10 per point, and this would start at the buying price of 517.5.
If you are correct and the price goes up, then you may choose to close the trade and take your profits when the price reaches 548.3 – 549.3. In this hypothetical situation, you would have made 548.3 minus 517.5 points, which works out to 30.8 points. With a stake of £10 per point, you would have won £308.
But what if the price had gone the other way? Even the best of traders have their share of losses, and you must be aware of the consequences of a move in the wrong direction. The price might have gone down to 491.2 – 492.2, and this might make you close your spread trade to prevent any further loss. The opening price was 517.5, and the spread bet closed at 491.2, a difference of 26.3 points. With your chosen stake, the cost would have been £263.
Sometimes you can reduce the amount that you lose when a bet goes against you by using a stop loss order, which is placed when you first take out the spread bet. The stoploss order instructs the spread betting company to close your trade when a certain losing price level is reached. Using one of these, you might have been taken out of the spread bet when the price was 503.2 – 504.2. In this case, you have lost from 517.5 to 503.2, which is 14.3 points. The cost to you would have been £143.
Hargreaves Lansdown Futures Based Bet
Taking the advice of some experts, you may feel that the shares of Hargreaves Lansdown are overvalued and due for a correction, but that it may take a couple of months before this happens. After considering that the risks and rewards, you might decide to place a short bet for £2.50 per point on the far quarter futures based price of 517.7 – 521.4. Here is the current chart: –
Supposing you are right, you might find that the price drops to 426.2 – 429.5, and decide to collect your winnings. As this was a short or sell bet, it went on at the lower price of 517.7, and then closed at the higher price of 429.5. This means you have gained 517.7-429.5 points, or 88.2 points. Multiplying by your stake, you have won £220.50.
Of course, when you are waiting for the price to move in your direction, you must be careful that the price does not go too far against you in case it does not return. Perhaps it went up to 586.7 – 589.3, and you decided that you could not hold on any longer, or wait to see if it came back, so you closed the bet. The bet started at 517.7, and you closed it at 589.3, which means you lost 71.6 points. At £2.50 per point, this would cost you £179.
Instead of watching the markets, you could have placed a stop loss order to protect your capital, and your spread betting broker would close the bet for a loss when this was reached. Perhaps it would have closed at 569.2 – 571.5 using this method. Once again, the bet started at 517.7, and this time the losing spread bet was closed at 571.5, which is a difference of 53.8 points. For your chosen stake, your losses would have been £134.50.
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