Betting against the euro seems like the type of thing everybody has been up to, but few have been as successful as the big boys wagering with IG Index. The favoured bet among these punters has been in the euro/dollar markets, where the euro has fallen dramatically from $1.45 to $1.25 in the past 12 months (a 2000-point move as these markets are traded to two further decimal places). IG reports that some whales have been selling at $25,000 a point, so that’s a profit of around $50 million.
Like an indigenous winner of the Tour de France, its seems like an age since France could boast possession of its own currency. But it is not only our Gallic pals who miss it.
Prior to the introduction of the euro in 1999, there was one money broker who capitalised on a massive discrepancy between short-term and long-term interest rates on La Balle, with the latter trading much lower in expectation of a rate cut. It never transpired.
“For several weeks, using futures, contracts [the money broker] borrowed long and lent short — I have described it this way for the sake of simplicity,” recalls Cantor Index’s David Buik.
“He kept doubling up his positions, having started at about £10 a point, for the best part of a year and eventually he liquidated his positions, having taken the best part of £5 million out of the ring.” Ooh la la.
Then there’s the one about the whale who shorted Facebook when it made its underwhelming New York debut in May. The big-hitter bet the stock would fall on May 21. The shares slumped $4, meaning that as our man had piled in for more than $8000 a point, he walked off with a profit of almost $3 million.
The bet was so huge, said one insider, that when the spread betting firm went to lay off the massive exposure, its broker insisted that the bet had to be closed that day. It duly was. In that one session, our anonymous big-hitter made returns of more than $400,000 an hour. Not bad for a day’s work.
Apple’s slogan used to be Think Different. But sometimes you just need to think bigger. Already a millionaire, a 50-year-old director could afford to go long with 2000 Apple contracts for difference with City Index in February 2009 at opening price of $99 (CFDs are essentially spread bets for big boys).
By mid-October 2010, he had cashed in half of them, with Apple’s shares at $307 (profit $208,000). But he dipped back into the market again a few days later, adding a further 3000 CFDs (so 4000 in total) at $307.50. The punt remains open and Apple now trades at around $700 a share. Our man is currently showing a profit of more than $2 million.
Sometimes you just get plain lucky.Google floated in 2004 at $85 a share and, after the shares initially surged, a rookie spread better placed an order to buy at $99 at £1 a point with Capital Spreads — only she seems to have forgotten about it almost immediately and did not log into her account again for almost a year.
When she did, she saw she had made a £20,000 profit, but assumed it to be an error and alerted customer services. It wasn’t. The price then stood at $300, meaning it had moved up by about 20,000 cents at a £1 a point). The lucky punter quickly decided that spread betting was not for her and immediately cashed out.
Occasionally, it is all about timing. One bold punter turned a £700,000 profit buying the Dow Jones Industrial Average in November 2010 when US Federal Reserve chairman Ben Bernanke began pumping $600 billion into the US economy and bubbling up the stock market.
Our man, an IT worker, bought the Dow for £10 a point at 10,900 but things were going so well that he upped the ante twice — eventually closing out for £1000 a point with Spreadex when the index hit 12,000 in January.
UK interest rates
How about making £110,000 in 10 seconds? Another Spreadex punter managed this feat in November 2008, when the Bank of England stunned everyone by slashing interest rates from 4.5% to 3% — the biggest cut in history. Our man bet on a bigger reduction than the 1% expected by buying Spreadex’s short sterling futures market at 95.80 (the contract is priced at 100 minus the expected sterling interest rate). The market jumped to 96.31, netting him 51 times his £2120 stake.
A clever trader decided in January 2000 that the level of the Dax could not be sustained, particularly as the Neuer Markt was starting to hang in rags. So he sold the Dax at 6955 — starting with a modest stake but, as his confidence grew, increasing the size of his bet. He closed out at 3550 in September 2001, taking £1.1 million out of the ring.
“He was never to be heard of [in spread betting circles] again,” says Buik. “What a shrewd fellow!”