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Trade of The Week: Bottom Fishing for Borders and Southern

By on August 24, 2012 in capital spreads, etx capital, financial spreads, ig index, intertrader, stop orders, trade of the week

On 16 July, oil company Borders and Southern Petroleum gapped-down massively from about 60p-per-share to less than 20p-per-share. Pity the fools who were holding a large position through this gap-down, which all goes to show why it is important to diversify or to employ guaranteed stop orders.

So, what did I do immediately after the share price gapped down? Why, I bought in, of course, two days later on 18 July at the bargain price of 16.79p-per-share. It really did turn out to be a bargain price, as you can see in the IG Index chart below which shows the price rebounding decisively in the subsequent weeks.

Trading Borders and Southern

If you’ve read my previous posts to this blog, you won’t need reminding that I didn’t need to annotate this chart to show my open trade (solid blue line) and the attendant stop order level (dashed red line) because IG Index does it automatically. So does ETX Capital, but I don’t have one of their charts to show you on this occasion.

With this share price having been so volatile of late, I might have had the foresight to employ a guaranteed stop order — just in case Borders and Southern headed south again. I didn’t have such foresight, but never mind because this is just one modest £1-per-point position among many.

Actually, I did take the precaution of opening essentially the same trade with a guaranteed stop order several days later in one of my London Capital Group (LCG) accounts. I use this term to encompass those spread betting accounts that all run on the LCG trading platform, which means Capital Spreads, InterTrader and Financial Spreads (plus some others). Whichever of those accounts I used, the chart would have looked like this:

Guaranteed Stop Borders and Southern
On this chart I have used a horizontal line annotation to show the level of my long entry at 17.1-per-share for £1-per-point on 25 July. I’ve not show my stop order level, but it’s the same as in the previous chart… and in this case is guaranteed to lock in at least £8 worth of profit.

Where to next with this trade, I wonder? Well, I hope that the price keeps rising and I get to pyramid the position to higher stakes as per my Position Trading approach.

My only regret is that I didn’t take this trade in a conventional stockbroker account, or a stocks and shares ISA, or a Self-Invested Personal Pension (SIPP) where I would have enjoyed a massive gain of almost 100%. But I’m not so regretful when I think that without the benefit of a guaranteed stop order in a conventional stockbroker account, and with the necessarily larger “investment” I would have made, I could easily have ended up much poorer rather than much richer. This is not a stock for widows and orphans, but thankfully I’m neither.

Disclaimer: this posting is for general education only; it is not trading advice.