Cocoa Spread Betting Guide

Cocoa Spread Betting Guide

cc Spread Betting Guide

arrow_forwardLive cc Chart
arrow_forwardLive cc Prices
arrow_forwardWhere to Spread Bet on cc
arrow_forwardHow to Spread Bet on cc


Live cc Chart and Prices



Where Can I Spread Bet on cc?

Most spread betting brokers offer prices and charts on commodities including cc e.g.:

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How to Spread Bet on cc

Let’s say you are thinking of trading the cocoa market and check a spread betting site, like Spreadex, and they are offering the latest market price priced at:

Cocoa (May) Futures: $2,273 – $2,279

Here is an example of how a futures spread betting market works

The Spread Trading Market: Cocoa (May) Futures
The Spread Betting Price: $2,273 – $2,279
This Means: Now you can bet on the Cocoa Futures market closing:

  arrow_upward  Above $2,279, or
  arrow_downward  Below $2,273

At the close of trading on the closing date for this ‘May’ futures spread betting market, 10 April 2012.

It should be noted that with a futures spread bet your position will be closed when the May Cocoa futures market expires, 10 April 2012. Nevertheless, you can also decide to close your spread bet prior to the settlement date.
Points (Units) Traded: Spread bets on the Cocoa market are priced in £x per $1.

Where $1 is $1 of the commodity’s price movement.

E.g. if Cocoa moves by $45 then you would win/lose 45 times your stake.
Stake (Trade Size): You work out how much you are going to risk per $1, e.g. £2 per $1, £5 per $1, £10 per $1 etc.
Quick Staking Example: For example, if your stake was £3 per $1 and Cocoa changes by $33, you would win / lose £3 per $1 x $33 = £99.



Worked Trading Example | Going Long of Cocoa

Spread betting on the commodity market to increase in value

You Decide Whether to Go Long or Short: Do you believe that Cocoa will settle on 10 April 2012:

  arrow_upward  Above $2,279? or
  arrow_downward  Below $2,273?

Let’s Assume You Choose to Go Long:   arrow_downward  Above $2,279
You Decide How Much to Risk, Opting for: £1 per $1
So What Now?
  • You make a profit of £1 for every $1 Cocoa settles higher than $2,279
  • You will lose £1 for each $1 Cocoa settles lower than $2,279
When Spread Betting on a Market to Increase Your Trading P/L = (Closing Price – Opening Price) x stake per $1
 
Scenario 1 Cocoa pushes higher and the spread betting futures market is adjusted to $2,382 – $2,388.
Lock in Your Profit? At this point, you could opt to keep your futures trade open until expiry or close it and take a profit. In this case you opt to close your position early and sell the market at $2,382.
Your Trading P/L = (Closing Price – Opening Price) x stake per $1
($2,382 – $2,279) x £1 per $1
$103 x £1 per $1
Your Trading P/L = £103 profit
 
Scenario 2 Cocoa decreases and the futures market is revised to $2,192 – $2,198.
Time to Limit Your Loss? You could now choose to keep your bet open until expiry or close it, i.e. close your spread bet and restrict your loss. In this case you choose to settle your bet at the current price by selling at $2,192.
Your Trading P/L = (Closing Price – Opening Price) x stake per $1
($2,192 – $2,279) x £1 per $1
-$87 x £1 per $1
Your Trading P/L = -£87 loss



Trading Example | Taking a Bearish View of Cocoa

Online spread betting on the commodity market to move down in value

You Now Choose Whether to Go Long or Short: Where do you think that Cocoa will finish at on 10 April 2012:

  arrow_upward  Above $2,279? or
  arrow_downward  Below $2,273?

Let’s Assume You Decide to Go Short:   arrow_downward  Below $2,273
You Decide Your Stake Size, Let’s Assume You Opt For: £2 per $1
What Next?
  • You will lose £2 for each $1 Cocoa closes above $2,273
  • You make a profit of £2 for each $1 Cocoa closes below $2,273
If You Are Speculating on a Market to Go Down Your Trading P/L = (Opening Price – Closing Price) x stake per $1
 
Scenario 3 Cocoa drops and the quote for the market moves to $2,201 – $2,207.
Close for a Profit? You may choose to keep your bet open until expiry or close it in order to lock in your profit. For this example, you decide to settle your position at the current rate by buying the market at $2,207.
Your Trading P/L = (Opening Price – Closing Price) x stake per $1
($2,273 – $2,207) x £2 per $1
$66 x £2 per $1
Your Trading P/L = £132 profit
 
Scenario 4 Cocoa increases and the quote for the spread betting futures market is revised and changes to $2,323 – $2,329.
Restrict Your Loss?At this point, you may decide to keep your position open until expiry or close it, i.e. close your spread bet to restrict your loss. For this example, you decide to settle your trade now and buy the market at $2,329.
Your Trading P/L = (Opening Price – Closing Price) x stake per $1
($2,273 – $2,329) x £2 per $1
-$56 x £2 per $1
Your Trading P/L = -£112 loss



Cocoa Notes:


AuthorAlex Turner

Senior Editor, SpreadBetMagazine

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