Is this a bad spread bet?

[lionheart3]

Most things I’v read online say spread betting isn’t for long term. However in the below situation I’m struggling to see why this isn’t 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 it’ll rise significantly
I currently own £20k shares
I don’t believe it’ll drop more than 20%
I’m 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 don’t think it likely) I’ll lose my position


Im sure I’m missing something and would be great to see what you think?

 

[malaguti]

Most things I’v read online say spread betting isn’t for long term. However in the below situation I’m struggling to see why this isn’t 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 it’ll rise significantly
I currently own £20k shares
I don’t believe it’ll drop more than 20%
I’m 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 don’t think it likely) I’ll lose my position


Im sure I’m 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

 

[counter_violent]

Most things I’v read online say spread betting isn’t for long term. However in the below situation I’m struggling to see why this isn’t 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 it’ll rise significantly
I currently own £20k shares
I don’t believe it’ll drop more than 20%
I’m 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 don’t think it likely) I’ll lose my position


Im sure I’m missing something and would be great to see what you think?

What's the company?

 

[lionheart3]

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...?

 

[rjmahan]

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