To all stock investors - Scotland?

InvestInPoker

sho_me_da_money wrote: »

Might take a punt on the straight bet of Y or N and slam a couple of grand on No. I think the odds are 1/5 on a No.

What are the latest polls saying?

It's probably the best way to just have a pure financial interest in the outcome. You can get a lot better than 1/5 at this current second

http://www.oddschecker.com/politics/british-politics/scottish-independence/referendum-outcome

Last poll of polls that I read was 51% NO 49% YES

sho_me_da_money

Actually looking at the polls it seems like YES is on the cards.

Chadsman

I am also no expert but I imagine those companies with bosses who have publicly backed independence will do well if there is a yes vote. I have also heard airlines may do well as independence will supposedly encourage more flights between Scotland and rUK.
I imagine the opposite is also true.

In_For_A_Penny_2

sho_me_da_money wrote: »

Actually looking at the polls it seems like YES is on the cards.

I think you're looking at the wrong data. They're only polls and it's close, and there's of course only one vote that matters but in general "No" have front in most polls (hence the odds pricing).

Recent polls:

Panelbase Yes 49% No 51%
ICM Yes 54% No 46%
Survation Yes 46% No 54%
Opinium Yes 47% No 53%

bowlhead99

InvestInPoker wrote: »

It's probably the best way to just have a pure financial interest in the outcome. You can get a lot better than 1/5 at this current second

http://www.oddschecker.com/politics/british-politics/scottish-independence/referendum-outcome

Last poll of polls that I read was 51% NO 49% YES

As of right now, Betfair's betting exchange is ahead of all of them (except Bwin) - you can return 1.28x your money then lose 5% of your profits to commission and still be ahead of the 1/4 or 1/5 odds you get elsewhere.



Of course, taking the chance to lose 100 or gain only 25 when the polls (or polls of polls) are showing 49:51 or 51:49 from day to day implies you have quite a lot of conviction. The bookies are only giving such short odds because they now have millions of punters who have bet a lot of money on a No. So they give you short odds on that outcome and much longer odds on the other side, as bookies realllly don't want the favourites to win.

But that doesn't necessarily translate to No being the most likely outcome at all, it is just the dynamics of the betting industry. The betting being reflected in the odds is UK wide - but the majority of the people placing the bets are not Scottish bettors and they're not out on the streets of small-town Scotland getting the depth of feeling from the local Scottish bettors who are actually doing the voting!

I am quite loaded up with No bets having been placing them in small amounts for about 5 months at various prices, so if a Yes comes in I'll be out over £1k, and given I'd face face potential losses on my UK shares too in that scenario, I'm reluctant to go heavier. At one point months back when I was getting odds of 1.4, I was thinking I'd put a few thousand on nearer the time if the odds stayed decent and the polls weren't too close - easy money! However the odds have shortened and the polls are close.

I have a few FX options with a spreadbet firm which may pay off if the result moves the market significantly. By all accounts a Yes would move it very significantly, a No probably less so but broadly positive.

But there are a variety of other things going on this week on the FX markets with lots of data coming out - tomorrow it's UK average earnings, UK unemployment and BOE minutes/ vote results, EU CPI, Fed interest rate decision and monetary policy statement, Thusday is UK retail sales for August and US housing starts, Philly Fed manufacturing index. The BOE and FOMC minutes / monetary policy statements are key ones and so GBPUSD should get pulled around a lot this week even before Thursday's exit polls start coming in. So if something may move a long way in either direction but you don't really know which direction, a straddle option strategy seems to fit the bill.

Reaper

Chadsman wrote: »

I have also heard airlines may do well as independence will supposedly encourage more flights between Scotland and rUK.

Not quite, it's the fact the nationalists have promised to cut air passenger duty. The might encourage more people to fly if you think the current level is a disincentive.

sho_me_da_money

bowlhead99 wrote: »

As of right now, Betfair's betting exchange is ahead of all of them (except Bwin) - you can return 1.28x your money then lose 5% of your profits to commission and still be ahead of the 1/4 or 1/5 odds you get elsewhere.



Of course, taking the chance to lose 100 or gain only 25 when the polls (or polls of polls) are showing 49:51 or 51:49 from day to day implies you have quite a lot of conviction. The bookies are only giving such short odds because they now have millions of punters who have bet a lot of money on a No. So they give you short odds on that outcome and much longer odds on the other side, as bookies realllly don't want the favourites to win.

But that doesn't necessarily translate to No being the most likely outcome at all, it is just the dynamics of the betting industry. The betting being reflected in the odds is UK wide - but the majority of the people placing the bets are not Scottish bettors and they're not out on the streets of small-town Scotland getting the depth of feeling from the local Scottish bettors who are actually doing the voting!

I am quite loaded up with No bets having been placing them in small amounts for about 5 months at various prices, so if a Yes comes in I'll be out over £1k, and given I'd face face potential losses on my UK shares too in that scenario, I'm reluctant to go heavier. At one point months back when I was getting odds of 1.4, I was thinking I'd put a few thousand on nearer the time if the odds stayed decent and the polls weren't too close - easy money! However the odds have shortened and the polls are close.

I have a few FX options with a spreadbet firm which may pay off if the result moves the market significantly. By all accounts a Yes would move it very significantly, a No probably less so but broadly positive.

But there are a variety of other things going on this week on the FX markets with lots of data coming out - tomorrow it's UK average earnings, UK unemployment and BOE minutes/ vote results, EU CPI, Fed interest rate decision and monetary policy statement, Thusday is UK retail sales for August and US housing starts, Philly Fed manufacturing index. The BOE and FOMC minutes / monetary policy statements are key ones and so GBPUSD should get pulled around a lot this week even before Thursday's exit polls start coming in. So if something may move a long way in either direction but you don't really know which direction, a straddle option strategy seems to fit the bill.

Interested in this part:

"I have a few FX options with a spreadbet firm which may pay off if the result moves the market significantly. By all accounts a Yes would move it very significantly, a No probably less so but broadly positive"

Who have you spreadbet on? and which way?

Archi_Bald

If you did bet 'No' at the Betfair Sportsbook (not at the Exchange), you'll be quids in now: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/11098848/Betfair-pays-out-early-on-Scottish-independence-No-vote.html

bowlhead99

sho_me_da_money wrote: »

Interested in this part:

"I have a few FX options with a spreadbet firm which may pay off if the result moves the market significantly. By all accounts a Yes would move it very significantly, a No probably less so but broadly positive"

Who have you spreadbet on? and which way?

I use IG.com

I have some 'call' option contracts where if the USD/GBP rate moves above about 1.639 by mid afternoon Friday I'll start to make money on those bets, more for every fraction of a point higher the rate goes.

I also have some 'put' options where if the rate goes below about 1.607 I'll start to make money on those bets, more for every point and so on.

Obviously, I can't win both sides at the same time. And if the rate just stays somewhere in the middle of that ~3 cent range, like it is now, my options would all be worthless and I lose both types of bet. If it goes slightly one way, the small profits on that position will cancel out the cost of the worthless option that I bought going the other way, and vice versa, and I'll roughly break even. If it goes heavily one way, or the other way, then the profits of the winning position will exceed the losses on the failed position.

So, I am effectively betting that the rate will do anything but stay where it is right now (about 1.627 at the time of writing). Really to make enough on one bet to pay the cost of the others, the rate needs to drop to under 1.595 or increase to 1.646. With more economic data to come this week plus the minutes of UK MPC and US FOMC plus the referendum, there is a chance this could happen although I admit it isn't particularly high. However, the bets do provide some kind of a hedge against a rapid depreciation of sterling in the event of a yes, as well as a some potential gains on a no if the market reacts quickly.

EDIT: if it helps explain how options work, the table below shows the open position for each of the trades


The figure to the right of the expiry date is the initial price paid for the option and the blue figure to the right of that is how many pounds have been bet (e.g. the +1). The black figure to the right of that is the current value of the option if sold right now (there is a spread between buy and sell prices which is how IG make their money). Then the final column is the current profit/loss that could be cashed out at the current sell price.

So the first row shows a bet that the market will finish above 1.6100 (a 16100 call). A price of 226.6 was paid for it (times +£1), and so it only ends up being profitable if the market ends up at 16326.6. At the moment, the spot exchange price is at 16270-odd with almost three days to go and is quite volatile, so I could sell it back to IG for 248.2 right now, equating to a paper profit of about £22 (final column). Of course, if the price ended up still being 16270 on Friday, the option to buy sterling at 16100 has a value of only 170, which is less than I paid for the option; I'd get something back but would have lost about £50. If the price ended up being 16500 with the call option set at 16100, the option would have a value of £400 which compares nicely to the buy price of £226.60 and I make money. If the price ended up being 16099 or 15900 or 15000 after a "yes to independence" vote, my option is worthless but I don't lose more than the £226.60 I staked / invested.

Looking at the Put options, the second row is the ability to profit from the rate being below 1.61 (16100). Here my option was bought at a higher spot rate than today's value so I was able to buy a contract for only 35.4 and invested £4.25 per point. If the market ends up at 16000 on Friday the contract would be worth 100, making me about 65 per pound invested because I originally paid 35 ish. The 65 profit x £4.25 gives total profits of around £275. If it ends up at 15500 the contract would be worth 565 per pound invested for about £2.4k profit. Meanwhile if the rate ends up at 16100 or 16200 or today's 16270 or perhaps 16500 after a No vote, the contract to sell at 16100 is worth nothing and I've wasted my 35.4 x £4.25 stake.

There is quite a bit of value in having the ability to make a lot of money on an outcome that goes your way without risking losing too much if it doesn't go as planned, so my option has a value driven both by the current spot rate and the general volatility of the market (more volatility = more likelihood it would be worth something). If I wanted to sell the PUT contract now I'd make a profit because the spot price is now closer to the 16100 target rate than it was when I bought the option, causing the price to rise, even though the contract isn't actually 'in the money' if the spot price stayed at current levels all through Friday.

Apologies for hijacking thread as I appreciate this is not really on the topic of 'what stocks would you buy for a Yes or No vote'

bowlhead99

Archi_Bald wrote: »

If you did bet 'No' at the Betfair Sportsbook (not at the Exchange), you'll be quids in now: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/11098848/Betfair-pays-out-early-on-Scottish-independence-No-vote.html

Yes, saw that earlier today. I use the exchange as the odds are usually marginally better and you get the chance to cash in bets before the event happens - I already took some money off the table when the No odds went from over 1.4 to under 1.2. But with hindsight getting the winnings early to go and re-bet on the same event elsewhere, would be quite nice!