Penny Stocks On The Move
In the spread betting of shares, how does margin and points per penny work in terms of stock returns overall?
I want to know how the spread betting of shares works in terms of margin, which for shares I think is 10%, i.e. 10x the money you invest you have control over for your stock position, and also how points per 1-10 pennys movement works which I’m sure can be from as little as making, (or losing) 1p – £1,000 per 1p to 10p move in the underlying stock. How does it all work together?
Also, for an example; if you place, say, a stock position of £1,000 on margin at 10% = £10,000 under your control, and you bet £2/10p move and the stock moves up 5%. how much money would you make as a percentage of your initial investment of £1,000? Would it be £10,000? Please help as I’m just a learner. Thanks.
£1000 x 5% = £50 or 500 points at 10p per point (likely to be the minimum). How much you make depends on what your risk / reward ratio is which should really not be more than 2% of you pot.
Forget about margin unless you want to see you pot wiped out very quickly.
£10,000 x 5% = £500 or 500 points at £1 per point, but you only need a 10% move in the opposite direction to wipe out your entire initial pot of £1000.
Also remember the spread is going to be rolled over on your position each day which will eat in to any profits on a daily basis. The spread will vary according to the stock, could be 5 pips, could be 20 pips.
Sign up for a demo account with IG index (the biggest spreadbetting provider) and download some of their tutorials to learn more.
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