Cobham Fundamentals
Cobham is an international company based in Dorset, and working in the military sector. Unless you have inside information, spread betting on Cobham may be a challenge, as you can see from the recent daily price chart included below.
The price has tended to be erratic, responding to frequent news updates and hence being somewhat unpredictable in advance. While it can be traded by novices, this might be a risky proposition, given that there are other shares and financial securities that are less volatile and friendlier to the beginner. Even so, there are some clear entry signals evident in the chart above, for those who are experienced enough to recognize them.
Cobham, in common with many other aerospace and defense technology companies, works at the cutting edge of technology. It employs more than 10,000 people, serving perhaps 100 countries. It was founded many years ago in 1934 by Sir Alan Cobham, and has seen many changes since its start as a flight refuelling company.
It has developed through mergers and acquisitions, combining with ML Aviation/Nash and Thompson, major competitors, in 1997. The 21st century saw acquisitions that tended more towards the communication, radio, satellite and antenna fields, and recently it has been rationalizing its product range, selling off its analytics strategic business unit in 2011.
It now has three major divisions: –
- Mission Systems, which is the world leader in aerial refuelling, and also deals with carrying of weapons and life support systems. This includes the aviation services unit which trains all UK helicopter pilots for the RAF, Army, and Royal Navy.
- Defence Systems, covering communications, radar and electronic warfare.
- Aerospace and Surveillance, which provides electronic components such as flight instruments and surveillance equipment.
While it can be an exciting company on which to spread bet, and to keep up with developments, you need to be careful that your downside position does not expose you to heavy losses.
Cobham Rolling Daily: How to Spread Bet on Cobham shares?
Cobham is involved in the military sector, which has been a good market in recent years. However, as a technology dependent issue, the share price is subject to volatility. The current price for a rolling daily bet is 215.36 – 216.44. Supposing you think that this market is due for a downturn, you may choose to place a sell bet for £3.50 per point.
If you are proved correct, the price may go down to 153.61 – 154.69. You could close your bet and work out how much you have won. This is simply done – just figure the number of points you gained and multiply by your stake. Your bet was placed at the selling price, which was 215.36, and it closed at the buying price of 154.69. That’s a difference of 60.67 points. With a stake of £3.50, your winnings amount to £212.34.
If on the other hand you are wrong, and the price goes up after you place the bet, you might find that you have to cut your losses and close the trade when the quote is 258.65 – 259.73. This time the points count against you. 259.73 minus 215.36 works out to 44.37 points, which for your chosen size of wager would cost you £155.30.
Many times you will find it more convenient to use a stop loss order to close a losing bet, rather than watching the price continually until you decide to close the trade. With a stoploss order often you will keep down your losses, because it will act as soon as your required level is reached. Perhaps this trade would have closed at 246.93 – 248.01 with a stoploss order. The bet was opened at 215.36, as before. The stop loss closed it at 248.01. 248.01 less 215.36 is 32.65 points, so this time you would have lost £114.28.
Cobham Futures Style Spread Bet
Futures based bets are usually available for the near quarter, midterm, and far quarter, and as they expire on particular months the number of months each has to run varies depending when the bet is placed. As an example, the mid-quarter futures bet on Cobham, quoted at 215.79 – 217.74, has five months to run at the time of writing.
If you feel bullish about the price of Cobham, you could place a long bet at 217.74, staking perhaps £7.50 per point. Even though this is a futures style spread bet, this does not stop you closing the trade at any time, for example if you reach your target price or if the bet is losing and you want to cut your losses.
Say the price goes up to 265.23 – 267.09, and you decide to take your profit and close the bet. The bet started at 217.74, and the selling price was 265.23 when you closed it, giving a difference in points of 47.49. Multiplying by your stake, this amounts to a win of £356.17.
If on the other hand the price falls, you may choose to close the spread bet for a loss, perhaps when the quote is 178.68 – 180.42. 217.74 minus 178.68 is 39.06 points, so your loss works out to £292.95.
Many spread betters find that it works out well to use stop loss orders, which are usually placed at the time of opening a bet, so that they don’t miss closing a losing bet before the loss becomes too large. If you had placed a stop loss order on this bet, you might find that it closed the trade for you at 185.97 – 187.89. This time you calculate your loss like this. The starting price was 217.74. The closing price was 185.97. You lost the difference, which is 31.77 points. At £7.50 per point, this is £238.27.