Diary of a spread better - Battered market boosts returns

Published on Saturday 19 July 2008 14:46

LAST week the global economy took even more of a battering, but my spread betting portfolio delivered a more than decent return.

When markets closed on Friday, I had 2,126.07 in my CMC Markets account, a 6% return on the initial investment of 2,000. After my final update on July 27, global online trader CMC Markets will pay out the 2,000 and any profit I've made to the Yorkhill Children's Foundation.

THE WEEK

&#149 Last week my strategy was to sit tight with a number of the bets I've placed, with the view that beleaguered stocks, such as financials, are set for a bounce.

&#149 Once again I held my 4 per point "buy" bet on Thus, which I bought with the view its share price would increase as Cable & Wireless continued to eye it up as a potential takeover target.

&#149 My decision to buy Bradford & Bingley at 4 per point, when it had a share price of 34p, has paid off. It got the backing of shareholders on its 400m rights issue on Thursday and the share price reached almost 55p.

&#149 I doubled my stake in the Royal Bank of Scotland "going long" from 2 per point to 4 per point as I still think it is still undervalued. Towards the end of last week this was reaping great results as the share price hit nearly 200p from 150p midweek.

&#149 I've kept my faith in Marks & Spencer with my 3 per point "going long" bet. Its share price rallied toward 270p.

&#149 A new stock I have added to my portfolio is Friends Provident. I bought the stake at 10 per point as I see it as one of the financial groups that will improve in coming months. The share price moved upwards towards the end of last week.

&#149 In what might be regarded as a risky decision, I'm sticking with my 1 per point "going long" bet that the pound will weaken against the dollar given poor consumer sentiment in the UK. But I have set a "stop loss" to limit my risk as trading foreign exchange tends to be more volatile than shares. Using stop losses and limit orders means you can decide how much you are willing to risk or gain.

This week will be my final one as a spread bettor – for now – and I'm considering whether to "go short" on oil, with the expectation that its price will fall.

"Going short" is possible with spread betting because I do not actually own the stock, instead I bet on price movements.

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