Spread Trading the Ireland Top 20 Index: ISEQ 20

In this article we discuss how you can spread trade on the Irish main index aka as the ISEQ 20.  In fact this is the index of choice for the Ireland economy and is sometimes referred to as the Ireland Top 20. It has just 20 constituent companies, which may make you feel that it cannot be representative of the economy as a whole; but bear in mind that the famous Dow Jones Industrial Average is only based on the prices of 30 companies, and manages to represent the much larger US economy quite well.

If you think that the Irish economy is picking up, you may want to place an up spread trade, otherwise known as a buy bet, or a long bet on this index. Your spread betting provider might quote you 431.20 – 432.70 for the ISEQ 20, so your bet of say £12 per point would go on at 432.70.

Assuming that the index climbs, you might decide to take your profits when the quote was 453.55 – 455.05. You would close your spread trade at the selling price of 453.55. You would work out your profits like this: –

  • First calculate how many points you gained, from 432.70 to 453.55
  • 453.55-432.70 equals 20.85 points
  • you staked £12 per point
  • your profit is therefore 20.85 times £12
  • total profit equals £250.20.

If the index had instead gone against you, you might find a value of 418.76 – 420.26 when you decide to close your spread trade to minimize your losses. Here’s how you figure your losses: –

  • First calculate how many points you lost from 432.70 to 418.76
  • 432.70-418.76 equals 13.94 points
  • as you staked £12 per point, you lost 13.94 times £12
  • that’s a total of £167.28.

Here’s another example of a bet on the ISEQ 20. As you are spread trading, you can bet on the index to go down just as easily as for it to go up. At the original quotation of 431.20 – 432.70, you place a down bet for £16 per point. The bet goes on at 431.20, the selling price.

Suppose the index goes down and you decide to take your winnings when it reaches 402.73 – 404.23. Your down bet closes at the buying price of 404.23. Working out your winnings,

  • the points difference is 431.20-404.23
  • so the total points gained is 26.97
  • your bet was for £16 per point
  • so you gained 26.97 times £16
  • total gain of £431.52.

You will often find that the bet will not go in your direction, and one of the secrets of successful spread betting is to minimize your losses by closing the bet as soon as you realize this. If after you had placed your short bet the index rose, you might decide to close the bet when the quotation reached 441.32 – 442.82. You can work out your losses in exactly the same way –

  • the points difference is 442.82-431.20
  • total points lost is 11.62
  • your bet was still for £16 per point
  • so the total amount you lost was 11.62 times £16, or £185.92.

How to Spread Bet the ISEQ 20

The ISEQ 20 is a small index which is based on the Ireland stock exchange – you may also find it referred to as the Ireland Top 20. It consists of the 20 most liquid and largest companies listed on the exchange, and the constituent companies are reviewed quarterly. If you’re interested in betting on the ISEQ, you had better see whether your spread betting company provides it, as some do not.

ISEQ stands for Ireland Stock Exchange Quotient – there are other indices issued under these initials, but the usual one is the ISEQ 20 referred to here. As with many indices, the numbers are normalized to give a practical range. The Ireland Top 20 is based on a nominal 1000 at the end of 2004. The constituent companies of the 20 are always reviewed by a panel, rather than determined mechanistically, but are more or less the 20 largest companies.

When a company drops to less than 25 in the rankings for turnover or capitalization, it is usually considered for exclusion from the index, provided they can find a replacement company that ranks better than 25 in both those items; and companies that rank at 20 or above in either of those categories are considered for inclusion, provided there’s a company ranking worse than 25 in either that can be excluded. Full details of the ranking system can be found on the stock exchange website, www.ISE.ie.

After the tremendous Irish financial crisis from 2008 to 2010, it may be no surprise to you that the initial value of 1000 given to the index has been lost, and the current quote for the ISEQ 20 Index is 431.95. The index did briefly touch 1500 points before the economic crash.

The main companies in the index include Ryanair, Kerry, and CRH which is a building material group (formerly Cement Roadstone Holdings). Financial groups used to be significant, but have now taken a smaller position, with some being dropped from the top 20 index altogether.

If you want to spread bet on the ISEQ 20, you will be hard-pressed to find much financial information in the major press. This may be a good thing, as typically the financial commentators may or may not get it right while sounding convincingly informed, and it is always better to do your own research. You might want to start your exploration of betting on this index by following its movements for a few weeks, and getting a feel for the current volatility.

A major influence on the Irish economy is the fact that it is tied into the euro, so Ireland is not in sole control of its own destiny. While it has had its economic problems, there are other countries such as Greece which can impact the euro and hence the Irish economy. All these factors, and the market sentiment, should come out when you look at the technical analysis of the ISEQ 20, as they all figure into how other traders are viewing the markets.