Is this a bad spread bet?

This is a discussion on Is this a bad spread bet? within the Spread Betting & CFDs forums, part of the Commercial category; Most things Iív read online say spread betting isnít for long term. However in the below situation Iím struggling to ...

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Old Dec 30, 2016, 6:07pm   #1
 
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Is this a bad spread bet?

Most things Iív read online say spread betting isnít for long term. However in the below situation Iím struggling to see why this isnít a better way of getting exposure to a company I like.

The company
Market cap ~£70M (listed on AIM)
I believe over 1-3 years itíll rise significantly
I currently own £20k shares
I donít believe itíll drop more than 20%
Iím thinking of upping my exposure significantly and using the £20k as a stop loss instead (say -20%)

Pros
I get more exposure
I am still staking the same money

Cons
If the shares fall below my stop loss (which i donít think it likely) Iíll lose my position


Im sure Iím missing something and would be great to see what you think?
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Old Dec 30, 2016, 6:23pm   #2
 
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Quote:
Originally Posted by lionheart3 View Post
Most things Iív read online say spread betting isnít for long term. However in the below situation Iím struggling to see why this isnít a better way of getting exposure to a company I like.

The company
Market cap ~£70M (listed on AIM)
I believe over 1-3 years itíll rise significantly
I currently own £20k shares
I donít believe itíll drop more than 20%
Iím thinking of upping my exposure significantly and using the £20k as a stop loss instead (say -20%)

Pros
I get more exposure
I am still staking the same money

Cons
If the shares fall below my stop loss (which i donít think it likely) Iíll lose my position


Im sure Iím missing something and would be great to see what you think?
what are the nightly costs associated with the spread bet and potentially holding this for 1-3 years? vs the cost of stamp duty, why not just purchase more shares?
also unless your stop loss is guaranteed and your spread is leveraged, you could lose more than your 20k

just a couple of things to bear in mind

otherwise spreadbetting is just as good if not better than forking out the whole 20k
personally though, you are clearly risking far more on a 20% stop loss (that sounds quite narrow a stop loss for that length of time frame) than the purchasing outright which you hold already
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Old Dec 30, 2016, 6:29pm   #3
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Quote:
Originally Posted by lionheart3 View Post
Most things Iív read online say spread betting isnít for long term. However in the below situation Iím struggling to see why this isnít a better way of getting exposure to a company I like.

The company
Market cap ~£70M (listed on AIM)
I believe over 1-3 years itíll rise significantly
I currently own £20k shares
I donít believe itíll drop more than 20%
Iím thinking of upping my exposure significantly and using the £20k as a stop loss instead (say -20%)

Pros
I get more exposure
I am still staking the same money

Cons
If the shares fall below my stop loss (which i donít think it likely) Iíll lose my position


Im sure Iím missing something and would be great to see what you think?
What's the company?
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Old Dec 30, 2016, 6:47pm   #4
 
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Joined Dec 2016
lionheart3 started this thread
Quote:
Originally Posted by malaguti View Post
what are the nightly costs associated with the spread bet and potentially holding this for 1-3 years? vs the cost of stamp duty, why not just purchase more shares?
also unless your stop loss is guaranteed and your spread is leveraged, you could lose more than your 20k

just a couple of things to bear in mind

otherwise spreadbetting is just as good if not better than forking out the whole 20k
personally though, you are clearly risking far more on a 20% stop loss (that sounds quite narrow a stop loss for that length of time frame) than the purchasing outright which you hold already
(my reply didn't seem to post, try again)

Thanks Malaguti,

So IG allow me to place a "guaranteed stop margin", so that should cover the max £20k loss right?

The main reason I don't want to buy more shares is that the company is still trading at a loss, and does have a chance of going to 0. So by spread betting I can get the exposure but actually risk less capital. If that makes sense...?
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Old Mar 3, 2017, 1:26pm   #5
 
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PM me the company and I can take a look for you - I am a pretty good analyst and have had luck in the past - my blog is www.deepvalueinvestments.wordpress.com
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