Spread betting on expected crash..How do I get some of this?

[The_Doc]

I was browsingtoday, looking at the 10 year FTSE trend and smoothing of share indices, and I found this page

http://www.marketoracle.co.uk/Article2499.html

and for your interest I quote various bits:

article said said:

By the start of August 2007.....I happened upon an advert in the Financial Times by IG Index, a spread book maker, which promised to offer the facility of trading the futures markets including the popular stock indices such as the Dow Jones Industrial Averages So I opened a £500 trading account in August 1987 and started trading just the stock indices FTSE100, FT30 and Dow Jones Index, as I knew absolutely nothing about the commodities markets.............

and

article said:

"Hi could you give me a price for November Dow Please ?"

"Yes Sir, It is trading at 2045"

"Good, I would like to sell to open £5 at 2045, with a 50 point stop"

" You want to sell ?"

"Yes Sell", maybe he thought I was already too heavily short ? Perhaps people were to scared to short the Dow ? I don't know, but the impression I got was of surprise.on the other end of a line.

So that was my fourth short opened for the day at 2045, meanwhile the actual Dow Jones spot indication was down only 50 points at about 2,200 due to slow opening of individual stocks against the actual futures nearly 150 points lower !

and after the crash

article said:

9pm - BBC 9'0 Clock News - Dow Jones closes down 508 points at 1739 !!! cough, cough splutter, 508 , FIVE HUNDRED AND EIGHT POINTS !!

Wow ! I am rich ! rich, RICH - How much ? £14,000 at least ! From an account balance of £700 to £14000 in one day ! Okay in today's money £14,000 is not a lot to shout about, but to a 19 year old in 1987, £14,000 was an enormous amount of money especially as it was made in one day ! As an example I could have bought a terraced house in the street for about £14,000!

Anyhow you get the idea and I shouldn't really copy and paste big chunks of the original article when you can click it yourself. The last few pictures at the bottom are really good, if only to see what office stationary looked like in 1987 before Bill Gates and Microsoft Office ruled the roost.

The conclusion is obviously that if you think the market is going to flush-down-the-toilet before anyone else, then this spread bets would be a god-send. Similarly you are open to risk if the position reverses. I wonder if such a plan could/would still work?

[shadowninja]

It could work and if you use stop losses then it won't be a problem. I've tried similar and failed in the past, though, so it isn't as easy as I thought it would be.

[MitchT]

In theory it's a great idea. The market is on its way down and ripe for shorting. The problem is that in times like these there is a lot of volatility, so you could call the long-term direction of the market right but be stopped-out by short-term rallies caused by bail-outs and things like that. To avoid this you either have to have a massive margin (to facilitate a massive stop) or you need to be trading in and out of perfectly timed positions on a very short-term basis.

[TVR MAN]

I thought if he was at £5 a point and it fell 508 points he now has made 508*5=£2540 ?

EDIT; Infact it only dropped 306 from his position so he made 306*5=£1530 ?

Edited by TVR MAN on Tuesday 7th October 20:38

Edited by TVR MAN on Tuesday 7th October 20:48

[shadowninja]

PS he's selling his book. If you go on Trade2Win.com, newbies are always asking about this signal service or that seminar. The usual answer is that if they are so good at trading, why are they trying to flog a service, seminar or book. They would be on a yacht in the Bahamas laughing at us silly sods panicking about our savings.

[The_Doc]

shadowninja said:

PS he's selling his book. If you go on Trade2Win.com, newbies are always asking about this signal service or that seminar. The usual answer is that if they are so good at trading, why are they trying to flog a service, seminar or book. They would be on a yacht in the Bahamas laughing at us silly sods panicking about our savings.

the biggest winners shout the quietest, eh?

discretion is the better part of valour,

etc etc

[shadowninja]

Something like that. But more like, if you were that good, would you bother writing a book that would be sold for £10 a piece, when you could click sell and make £15k a day?

[Simpo Two]

When I pass info like this to my IFA/stockbrokers, they say it's 'too risky'. So they go up and down on the tide, about as well as I could do in fact

[TheCaseAce]

I signed up to IG Index on the big "HBOS Crash Day" recently - they have a really good Betfair style application to view all the markets live.

Not actually put any money in it yet though!

The trouble with it is, you need a sustained rise or sustained fall - and many indices like the Dow and the FTSE are very variable.

Look at today's graph (this link will be valid on 8th oct!)
http://finance.google.co.uk/finance?cid=12590587

Started around 4500
Went DOWN and bottomed at 4300
Went UP and peaked at 4650
the went back DOWN and ended at 4400

So there's a variance of 350 points ish from peak to trough.

Now, today was a crazy day by any standards... but even if the overall trend is downwards, you can still hit your stop and lose your bet with just a fluctuation.


You can bet on the trend in house prices too, which seems an interesting one.




I think next at some point I might stick a small amount of money in it... as much as I am prepared to lose, I guess.

Which for a 29 year old with no pension should probably be £0 but never mind eh.

[The_Doc]

TheCaseAce said:

I think next at some point I might stick a small amount of money in it... as much as I am prepared to lose, I guess.

Which for a 29 year old with no pension should probably be £0 but never mind eh.

Pension money might be seen to be a less well controlled punt on the markets anyhow, why not put your 'pension' money into IG, at least you are in charge of it.....