Bearish FTSE snatches back my portfolio's profits

Published on Saturday 12 July 2008 14:24

IN A week of even more turmoil for the financial markets, my spread betting portfolio failed to hold on to the gains reported in the first instalment of my diary last Sunday.

However, I am confident the market can bounce back after a particularly bearish end to the week when the FTSE 100 dropped to 5,261.9.

After my final update on July 27, CMC Markets, a global online trader, will pay out to the Yorkhill Children's Foundation whatever profit I've made on the 2,000 it placed in my account.

THE WEEK

&#149 At the start of the week I decided to hold on to my 4 per point 'buy' bet on Thus telecoms group. I bought Thus with the view that its share price would increase as Cable & Wireless continued to eye it up as a potential takeover target.

&#149 I also decided to stick with my 1 per point bet to 'go short' on Persimmon in the belief that housebuilders' share prices will continue to fall. Having bought it at 245p, I'll get my return if the share price goes down to 222p.

&#149 I'm sticking with my 1 per point bet that the pound will weaken against the dollar given poor consumer sentiment in the UK.

&#149 On Wednesday I decided to buy Bradford & Bingley at 4 per point when it had a share price of 34p. I opted for B&B in the hope that it will get the backing of shareholders to get it out of its cash crisis. I have a stop loss of 32p to limit my risk.

&#149 On Thursday I bought Royal Bank of Scotland at 2 per point as I believe it is undervalued. Although the RBS share price has dropped on the back of the news it is to sell some Australian ABN Amro assets, I am confident it can bounce back.

&#149 On Thursday I also bought Marks & Spencer at 3 per point, thinking that most of its bad news is out and the share price will increase.

By the end of the week I was down to 1,920.26. But this is a relatively small drop of 2.3% on my initial investment of 2,000 and there are still 14 days to go before my spread betting comes to an end.

If the markets remain in bear territory I will be looking to go short on more bets this week, allowing me to profit from falling share prices.

&#149 www.cmcmarkets.co.uk

The basics

Spread betting is a way of trading on a financial market or product, such as a share or commodity, without physically owning it.

Investors 'bet' on whether the price will go up or down in value. For every point it moves in their favour they win multiples of that stake, and for every point it moves against them they lose multiples.

The profit or loss the investor makes is the difference between the price at which they buy and the one at which they sell.