AA PLC Spread Bet

Sea of Red
Sea of Red

26 September 2017: Ouch… AA Takes a 10% Hit

The AA share price took at 10% hit this morning. Glad we took the early loss and exited that trade.

11 September 2017: Example of Why You Close A Losing Spread Bet

Just checking the AA share price, the 200p support gave little… err… support.

Glad we closed for a small loss at 206p rather than holding on for the current price of 163p.

If anything, it’s tempting to short the market. The share price does seem to be in a nasty down channel.

Having said that, the chart below is a weekly chart and the current price is in the middle of the channel. No need to short now.

It’s more tempting to short if the price comes back to 200p… and I’d probably wait for the channel to show some resistance too.

Daily AA PLC Chart (11 September 2017)
Keep an Eye on This…

4 August 2017: Closing Time for My AA. Spread Bet

OK, I expected a quick bounce back after some poor PR and the stock is not doing what I thought it would.

Also, as stated below, this is not a buy-and-hold trade.

I bought at 215p and the market is down to 206.38p to 207.72p.

Looking at the weekly chart there seems to be support in the 200 – 210p area. After that, who knows?

Daily AA PLC Chart
You don’t want to be stuck on the wrong side of this…

It is tempting to move the Stop Loss much closer to 195p. I.e. hoping for a bounce off support and if the share price drops below 195p, then that would be an acceptable 20pt loss.

At the same time, the upper trend line is very negative and getting closer to this support.

Of course, I could still be right but the upside is looking very limited. To stay in the trade feels like gambling.

Time to Close for a Small Loss

My positive short-term view of the trade has changed. My negative long-term view is unchanged. It’s closing time:

  • arrow_forwardSpread Bet: £2/pt long of AA.
  • arrow_forwardOpen: 215p
  • arrow_forwardClose: 206.18p
  • arrow_forwardLoss: 8.82pt (in this case, points and pennies are the same thing)
  • arrow_forwardTrading P&L: -8.82pt x £2/pt = -£17.64
  • arrow_forwardOvernight Financing costs = 2 x -£0.03 = -£0.06
  • trending_downTotal Loss = -£17.70
I’ve let my head rule my heart. That’s lead to controlled trading and closing the trade for a small loss.

Not a disaster and worth a small speculative trade.

2 August 2017: Small Buy of AA Plc?

My small buy of AA PLC is now live (see reasoning and trade set-up below).

Here are a few more details on the trade.

Short-term AA PLC Chart

To me the short-term chart just shows bad PR / a blip. Yesterday’s RNS to the stock market is fairly reassuring (see below for a link to the RNS).

Daily AA PLC Chart

This is Not a Long-Term Trade

This is not a buy and hold, looking at the weekly chart (below), the AA PLC share price is in a nasty downtrend.

If there isn’t a strong re-bound over the next 1-2 weeks then I will probably close this trade.

Having said that, I’m only aiming for recent high of 239p (and there’s no need to be greedy… and I know little else about the company fundamentals).

Weekly AA PLC Chart
Like I said, not a buy-and-hold…

While I pointed out some of the good bits of the RNS yesterday, there are a few concerns:

The financials for the first six months have been negatively impacted by erratic work load patterns on an inherently fixed cost base. Especially in June and July which had significant spikes in demand.

We have also incurred a one-off cost with a profit sharing arrangement with a third party.

We have also seen a significant growth in the number of insurance policies underwritten by our underwriting business on behalf of our broker.

AA’s accounting policies are based on revenue recognition, therefore this intra-Group revenue is deferred over the life of the policy with a corresponding impact on profits in the year in which that policy is written.

We now expect the full year performance to be broadly in line with that of the last financial year.

Supporting the long-term share price should be the P/E ratio which fairly low at 8.43.

How the Trade Works

My trade set-up is listed below.

I’ve traded with IG where the share price, as of 8.45am, is 213.84 – 215.24.

I would normally have traded on Financial Spreads (simple quick platform and tight-ish spreads) but annoyingly they don’t offer individual FTSE 250 shares.

The share price is roughly 213p – 215p or £2.13 – £2.15, if you spread bet then you are betting per penny of movement.

So with my £2 stake, I win £2 for every penny the stock moves above 215p and I lose £2 for every penny the stock drops below 215p.

Also see, how to spread bet on shares.

Ticker Code: is “AA.” (i.e. with the dot)

I don’t mind holding this spread bet for a few weeks, the overnight financing fee will be fairly small.

1 August 2017: Small Buy of AA Plc?

The AA stock has taken a pounding after the executive chairman was sacked for ‘gross misconduct’.

It’s interesting that AA have not put out a profits warning but there is a positive RNS.

RNS 1 August 2017 “AA Plc: Bob Mackenzie and pre-close update”

I like the pre-close RNS with:

As anticipated, the key operating metrics for the business demonstrate a robust performance in the first half…

We remain confident in the resilience and long-term prospects of the AA.
Read AA Plc: Bob Mackenzie and pre-close update.

  • trending_upTherefore, to me, that sharp drop in the stock looks to be worth a small buy, i.e. I’m assuming there will be a rebound because the drop in share price was just to do with executive chairman rather than company fundamentals.
Having said that, I missed the 4.30pm close today, which is annoying.

I’ve placed an order to buy at 215p.

Trade Set-up (Order to Buy)
  • arrow_forwardBuy
  • arrow_forwardStake £2 (I did say small)
  • arrow_forwardLimit order at 239p (recent high and 24point profit)
  • arrow_forwardStop order at 115p (I.e. plenty of wiggle room and only a 100point loss)
If there’s plenty of buying on the open then that may not get filled and I’ll have to make a judgment call.

I’m only aiming for 239p… I don’t want to stay in this trade… the long-term chart isn’t pretty.

  • warningAA Plc isn’t the most traded stock, watch out for wide spreads.

AuthorAlex Turner

Senior Editor, SpreadBetMagazine

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