Ryanair Fundamentals

Ryanair is an exciting prospect for spread betting, as it is a company that people love or hate. You can see from the weekly price chart below that at the moment it is particularly in favour, with the stock price making nearly 50% gains in the last year.

The company was established in the middle of the 1980s, and started as a very small airline, flying between Ireland and England. It has grown over the years, particularly with the deregulation of the aviation industry in 1997, and is now across Europe with plans to include the US in the near future.

Ryanair went public in 1997, and the funds raised were used to fuel a major expansion. From the start, one of Ryanair’s major competitors was Aer Lingus. Ryanair chose to model itself on South West Airlines in the US, operating a budget fleet with fast turnaround and offering no-frills transportation, without even including a first-class option. The routes chosen used regional airports which offered lower fees than the major termini.

Online service was started in 2000, and checking in online has become mandatory since 2010, when check-in desks were closed. There have been various times when Ryanair has tried to take over Aer Lingus, its major competitor operating the Irish route, but these attempts have failed for a variety of reasons. However, Ryanair is now much larger than Aer Lingus.

Ryanair’s cost cutting measures have met with a mixed response. It charges fees for checked baggage, food, and drinks, and has non-reclining seats with no seatback pockets. However, its prices are substantially cheaper than direct competitors, providing the value that many consumers are demanding. It wasn’t until 2009 that Ryanair had its first annual loss, suggesting that its cutthroat operation has proved to be a winning formula. Its major competitor is EasyJet, which Ryanair calls a “high fares airline”.

Ryanair Rolling Daily

When you are considering spread betting on Ryanair, you need to be sure that you keep an eye on any current airline news, as Ryanair has been known from time to time to issue statements or directives that impact its financial standing. The current price for a daily rolling bet is 570.3 – 571.5. If you expect that the price may go up, continuing the current trend, you may choose to place a long spread bet for £3 per point.

Suppose that you are correct, and the price goes up to 635.9 – 637.2. While you know that you need to “let your winners run”, your charts suggest that this is likely to be near a peak for the present trend, so you decide to cash in your bet. You bet was opened at 571.5, and closes at 635.9. That means you made 635.9 minus 571.5 points, which is 64.4 points. With a bet of £3 per point, this is a total of £193.20.

Of course if you were wrong, and the price started going down after you placed your bet, you would need to close your position quickly to minimize your losses. Suppose you closed it when the price went down to 532.6 – 533.8. This time the closing price would be 532.6, and taking this away from the opening price of 571.5, you would find that you have lost 38.9 points. For your size of stake, this amounts to £116.70.

If you had used a stop loss order, you might find that a losing position was closed earlier, say when the price fell to 544.9 – 546.1. The closing price this time would be 544.9, the selling price as this is a long bet. You would have lost 571.5 minus 544.9 points, which is 26.6 points. Your stake of £3 per point still applies, which means you would have lost £79.80.

Ryanair Futures Based Bet

Ryanair is currently putting in a good performance, and you may be tempted to place a futures style long bet in the belief that the price will continue to increase. The current price for the far quarter is quoted as 569.3 – 576.2. You decide to wager £5 per point at the buying price of 576.2.

If you’re correct, you might find that the price goes up to 621.3 – 626.5, and decide to collect your profit. Your bet will close at 621.3, which means you would have gained 621.3 minus 576.2 points. This works out to 45.1 points which for your chosen size of wager is £225.50.

It is important to remember that even with a futures style bet, you can close the wager at any time, particularly if the price is starting to go against you. Say the price dropped to 543.7 – 550.1, and you decided that the reason you had thought the price would go up was no longer valid. You could close the bet at 543.7. The result is that you would lose 576.2 less 543.7 points, which works out to 32.5 points. For your chosen size of stake, that would cost you £162.50.

Many spread betters decide to use a stop loss order to cover them in case of loss. With a stop loss order, the spread betting provider will automatically close a losing trade for you when it reaches a price you set, and you do not need to keep a watch on the market. Perhaps with a stop loss order this losing bet would have closed when the price fell to 551.0 – 557.2. This time you have lost 576.2 – 551.0 points, a total of 25.2 points. At £5 per point, this works out to £126, showing that the stop loss order in this case would have saved you some money.