The first thing I did this morning (apart from having a shave) was to take a punt on FirstGroup when it was announced that the company had been awarded the West Coast rail franchise ahead of the incumbent Virgin / Stagecoach combo.
Sir Richard Branson was single-mindedly in the opinion that the government had made a mistake in taking the contract away from him, and that FirstGroup had made a mistake in paying such a high price. Well, he would say that, wouldn’t he?
Investors seem to have been in two minds about what to make of it, with the price of FirstGroup shares gapping up by 7 points (about 2.7%) at the open and then promptly falling by up to 30 points before rebounding upwards again. The final candle of the daily Capital Spreads chart (below) shows what happened.
This potentially longer-term position trade is only half the story. When my initial position went into loss, and I was still confident of the prior resistance acting as new support, I also executed a short-term “day trade” at 235.5 which closed for a profit of 4 points (or £4 on a £1-per-point spread bet). Not a big profit, but more than the very small risk I took with a very tight stop order, and this short-lived trade has at least notionally taken 4 points (or £4) worth of risk away from the position trade.
Whatever happens tomorrow morning, and even if the price gaps down massively (which is unlikely but not impossible), I know that the risk on my residual position trade is fixed absolutely. And that’s guaranteed!
Disclaimer: this posting is for general education only; it is not trading advice.