Victrex Fundamentals
Victrex is a specialist company, concentrating on one type of product. As you can see from the weekly price chart below, you can expect high volatility, which makes it possible to achieve high profits from spread betting and trading, although you must be careful to avoid large losses.
The company was established in 1993 from a branch of Imperial Chemical Industries (ICI), and was offered on the London Stock Exchange in 1995. Its product is a type of polymer which is often referred to as PEEK, which stands for polyether ether ketone, and is a thermoplastic used for engineering purposes. It is a robust thermoplastic, and can be used to form products that have to work in difficult circumstances such as high temperatures, including bearings and piston parts.
It also finds uses in the medical field for implants, and in the aerospace and automotive industries. Of course, these advantages come at a price, and PEEK products tend to be high-value items.
The weekly price chart above shows significant volatility, and has been chosen because the daily price chart at the moment (from August 2012) gives a totally different picture, showing a gentle uptrend with short candlesticks, implying a stable and consistent price. This is an example of how you must make a habit of looking at different timescales for any financial product that you are considering spread betting on, in order to get the whole picture.
On this time scale it is easy to see from the MACD some tradable trends. Despite the generally muddled price at the end of 2011, there was a positive sign from the MACD which signalled a gain of 300 or 400 points in the first half of 2012, and the reversal was also noted. The uptrend in August has also proved to be strong.
Victrex Rolling Daily
Victrex is in the specialized field of making polymers, which are often used in making pipes, for example for tubing for the Airbus. The current price for a daily rolling bet is 1584 – 1592. Thinking that the current uptrend will continue, you might choose to wager £2.50 per point on a long bet at 1592.
Suppose that the price goes up, as you hope, to 1707 – 1715. Your spread betting provider will work it out for you, but this is how you can figure for yourself how much you have profited: –
- Your long bet was placed at 1592
- You closed your bet at 1707
- Therefore you have gained 1707-1592 points
- Which is 115 points
- Your stake was £2.50 per point
- 115 times £2.50 is a profit of £287.50
Some of the time you will find that your spread bet loses, and you need to work out your losses. Suppose the price goes down to 1510.2 – 1518.2: –
- Your long bet was placed at 1592
- You closed your bet at 1510.2
- Therefore you have lost 1592 minus 1510.2 points
- Which is 81.8 points
- Your stake was £2.50 per point
- 81.8 times £2.50 is a loss of £204.50
Many traders find it convenient to use a stop loss order to cover their losing trades. It only activates if your spread bet loses by an amount you set, and then it requires your spread betting provider to close the bet before you lose anymore. In this case, a stop loss order might have closed your bet when the quote was 1547.1 – 1555.1: –
- Your long bet was placed at 1592
- Your bet was closed when it reached 1547.1
- Therefore you have lost 1592 minus 1547.1 points
- Which is 44.9 points
- Your stake was £2.50 per point
- 44.9 times £2.50 is a loss of £112.25
Victrex Quarterly Futures Bet
Taking out a futures style bet is associated in some people’s minds with holding on to an open bet for months. While it is true that you can hold the bet until the expiration date, it is good to know that you can also close the bet at any time if you want to capture the profit you have made, or prevent any further losses on a losing position. The current price for a far quarter futures style bet is 1594 – 1606, and you might decide to place a short bet for £1.50 per point.
In this example, assume that the price goes down to 1409.5 – 1421.5. With a short or sell bet, that means that you are in profit and you may choose to close your bet and collect your winnings. You opened the bet at a price of 1594, and you closed it at a price of 1421.5. That means you have gained 1594 minus 1421.5 points, which is 172.5 points. You staked £1.50 per point, so by simple multiplication you can see that you gained £258.75 on this bet.
On the other hand, the price might have gone up after you opened your short position, and you may have to choose to close it when the quote is 1667.8 – 1679.8 and accept your loss. With a starting price of 1594 and a closing price of 1679.8, you would have lost 85.8 points. Multiplying by your stake of £1.50, this amounts to a loss of £128.70.
If you had decided to place a stoploss order on this trade, it might have closed earlier for a reduced loss. Say it closed at 1630.9 – 1642.9. 1642.9 minus 1594 is 48.9 points, the amount that this bet lost. Multiplying by £1.50, you can see that this losing bet would have cost you £73.35.
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