How to Trade Rolls-Royce Shares: Rolls-Royce Stock Guide

Rolls-Royce (RR-L), a major player in the global luxury automobile industry, may be an attractive investment for those looking to add this market sector to their CFD trading portfolio. In this article, we will delve into Rolls-Royce’s history, market dynamics, potential advantages and drawbacks, and more:

TL;DR

• Company Overview: Rolls-Royce Motor Cars is a luxury automobile manufacturer that is a subsidiary of BMW AG and operates independently from its historical predecessors. It is renowned for its high-end vehicles, such as the Phantom, Ghost, and the new Spectre electric model.


• Stock History: Rolls-Royce shares have experienced significant volatility, peaking at around 440p in January 2014 and falling below 40p during the COVID-19 pandemic. The stock has shown resilience, recovering to triple its value between the end of coronavirus restrictions in the UK through the first half of 2024.


• CFDs vs. Traditional Shares: Contracts for Difference allow speculation on Rolls-Royce’s stock price without owning the shares, providing opportunities to trade both rising and falling prices and profit if the price moves in the desirable direction. However, CFDs involve higher risks due to leverage and lack of dividends or voting rights.


• Factors Influencing Share Price: Key factors include financial performance, trends in the aerospace industry, orders and contracts, geopolitical events, and macroeconomic indicators. Understanding these can aid in CFD trading strategies.


• Trading Strategies: Traders can use fundamental and technical analysis to guide their CFD trades. Strategies include swing, position, and day trading, each suited to different trading styles and risk appetites.

What Is Rolls-Royce Holdings Plc?

Rolls-Royce Motor Cars Limited is a renowned British luxury automobile manufacturer. Since 2003, it has operated as a wholly-owned subsidiary of BMW AG (BMW.DE). This prestigious company is the exclusive producer of Rolls-Royce-branded motor cars, with its administrative and production headquarters situated on the expansive 42-acre Goodwood Estate in West Sussex, England.

From 1906 to 2003, Rolls-Royce Limited and later Rolls-Royce Motors produced and marketed Rolls-Royce cars under the Rolls-Royce brand. Since the BMW acquisition in 2003, Rolls-Royce Motor Cars has operated independently from its predecessors, besides briefly supplying components and engines. Bentley Motors Limited, a subsidiary of Volkswagen AG (VOW.DE), directly succeeded Rolls-Royce Motors, inheriting the legacy of manufacturing both Rolls-Royce and Bentley vehicles until the BMW-controlled entity began its operations in 2003.

The BBC has lauded Rolls-Royce as "probably one of the most recognised icons in the world," noting that the brand name has become synonymous with excellence and luxury. Rolls-Royce's distinguished lineup includes the Phantom, a luxurious four-door saloon introduced in 2003, and its extended wheelbase, coupé, and convertible variants. Other notable models are the smaller Ghost four-door saloon, the Wraith coupé, the Dawn convertible, the Cullinan SUV, and the 2023 Spectre, marking the company's entry into the all-electric vehicle market.

Rolls-Royce Stock History

Since the turn of the millennium, Rolls-Royce's stock price has experienced significant fluctuations. At the turn of the millennium, the stock hovered around 80p, dipping to just above 20p by March 2003. A subsequent rally saw it reach nearly 200p by June 2007.

Despite resilience during the 2007-2008 financial crisis, the stock fell to just below 100p by March 2009. It then rose to an all-time high of around 440p in January 2014 before correcting to below 180p by November 2015. A mini-rally peaked at around 380p in August 2018, but costly fixes to Trent engines and a Moody’s downgrade caused another decline.

The COVID-19 pandemic further impacted the stock, pushing it below 40p by October 2020. It regained the 100p handle in early 2021, showcasing the company's resilience despite ongoing challenges. Despite experiencing various ups and downs in the years following the coronavirus era, from the official lifting of COVID restrictions in February 2022 through the end of June 2024, Rolls-Royce registered a further tripling in the value of its shares.

What Are Rolls-Royce Share CFDs?

Rolls-Royce's share capital consists of shares issued without a nominal par value, representing equal fractions of the company's subscribed capital. These shares are traded on various stock exchanges, reflecting Rolls-Royce's global reach and investor base. Traditional shares grant ownership rights, potential dividends, and voting privileges at shareholder meetings. The value of these shares depends on the company's performance and broader market conditions.

Conversely, Rolls-Royce share CFDs (Contracts for Difference) allow investors to speculate on share price movements without owning the underlying shares. With CFDs, investors can take long or short positions, leveraging a smaller initial investment to gain greater exposure. However, this leverage also amplifies potential losses. Unlike traditional shareholders, CFD traders do not receive dividends or voting rights, as they do not hold actual shares.

CFDs offer flexibility and potential for capturing both bullish and bearish market movements, but they also involve an inherently higher level of risk due to leverage. This makes them suitable for experienced traders who understand the complexities and risks involved in CFD trading.

Factors Affecting Rolls-Royce Share Price

Traditional share price movements are crucial for CFD traders, as CFDs allow speculation on these price changes without owning the underlying shares. Understanding the factors driving share prices helps CFD traders increase their comprehension of the various market mechanics that may make an impact on CFD values. Below, you'll find some of the key factors that may lead to rises or falls in the price of Rolls-Royce shares:

• Financial Performance: Rolls-Royce's stock price is heavily influenced by its financial results, including revenue, profit margins, and earnings per share. Positive financial outcomes typically boost investor confidence and drive up the stock price.


• Aerospace Industry Trends: As a key player in the aerospace sector, Rolls-Royce's stock price is affected by industry-wide trends such as demand for new aircraft, airline profitability, and advancements in aviation technology.


• Orders and Contracts: The number and value of orders and contracts for Rolls-Royce's engines and services can significantly impact its stock price by signalling future revenue potential.


• Geopolitical Events: Rolls-Royce's stock price can be affected, directly or indirectly, by international tensions and competition that change the contours of the global trade system.


• Macroeconomic Factors: Economic indicators like GDP growth, inflation, and interest rates, as well as fluctuations in oil (CL) prices and exchange rates, can affect the company’s financial performance and stock price.

How to Trade Rolls-Royce Share CFDs

Trading contracts for differences on Rolls-Royce shares is one way for traders to attempt to capture the firm's price movements without owning the actual shares. Rolls-Royce share CFDs are derivative instruments mirroring the company's share price, enabling traders to capture price fluctuations. One integral aspect of CFD trading is the difference between position types:

• Long Positions: Taking a long position involves speculating that Rolls-Royce's share price will increase. Traders aim to profit from this anticipated rise.


• Short Positions: Conversely, a short position involves speculating that the share price will decrease, allowing traders to profit from the decline.

A trader will incur loss, if the price moves against their position.

CFD trading offers flexibility as it allows traders to participate in both rising and falling markets. However, it also carries risks, particularly due to leverage, which magnifies both potential gains and losses. Unlike owning traditional shares, CFD traders do not have voting rights or receive dividends, as they do not hold the actual shares. Instead, their focus is solely on the price movement of the underlying asset. This makes understanding the factors influencing Rolls-Royce's share price crucial for CFD traders to make informed decisions and manage their risks effectively.

Rolls-Royce Shares Trading Hours

The primary trading hours for traditional Rolls-Royce shares on the London Stock Exchange are Monday to Friday from 09:00 to 17:30 (UTC).

When engaging in share CFD trading instead of traditional stock exchange trading, Rolls-Royce share CFDs on Plus500’s trading platform are available from Monday to Friday from 07:00 to 15:30 (UTC).*

*Please note that trading platform hours are subject to the individual operator.

How to Analyse Rolls-Royce Share CFDs

Forming your own analysis of Rolls-Royce shares' market behaviour involves several aspects that can be combined to offer insights into potential trends affecting the overlying CFD trading arena.

Technical Analysis:

• Charts: Identifying recurring patterns in Rolls-Royce's price charts, such as support and resistance levels, trendlines, and formations, helps predict future movements.


• Technical Indicators: Tools like Moving Averages, the Stochastic Oscillator, and the Relative Strength Index (RSI), assess momentum, trend direction, and overbought or oversold conditions.

Fundamental Analysis:

• Financial Statements: Examining Rolls-Royce's financial reports, including net revenue, profit and loss statements, and cash flow, provides insight into its financial health.


• Economic Factors: Evaluating sector performance, macroeconomic indicators, and regulatory changes impacting Rolls-Royce helps gauge the broader economic environment's influence on the company.


• Competitive Analysis: Comparing Rolls-Royce's market position against competitors, including market share and product offerings, gives a perspective on its competitive strength within the aerospace and defence industry.

By combining these analytical approaches, investors and traders can develop a comprehensive understanding of Rolls-Royce's share price behaviour, which is crucial for effective CFD trading.

Advantages of Trading Rolls-Royce Share CFDs

• Flexibility: Trading CFDs on Rolls-Royce shares allows traders to trade both rising prices by opening a Long (Buy) position and falling stock prices by opening a Short (Sell) position.


• Access to Market Movements: CFDs offer the ability to speculate on short-term price movements of Rolls-Royce shares without the need to own the underlying stock. This can be advantageous for traders looking to capitalise on volatility and market fluctuations without long-term commitments.

Disadvantages of Trading Rolls-Royce Share CFDs

• Leverage: While leverage allows a trader to control a position value larger than the initial capital, hence amplifying profits, the chance of losing your trading capital is also magnified.


• Political and Legislative Risks: Rolls-Royce, being a prominent UK-based company, is susceptible to political and legislative influences, such as changes stemming from Brexit or alterations in environmental and safety regulations. These factors can introduce uncertainty and volatility into the stock’s performance, impacting CFD trades.


• Negative Publicity and Legal Challenges: The company’s history with corruption and bribery allegations and high-profile legal battles and settlements can lead to negative public perception and stock price volatility. Such issues may adversely affect CFD trading outcomes and increase market risk.


• Earnings Report Volatility: Rolls-Royce’s periodic earnings reports can significantly influence stock prices, especially due to concerns over its debt levels and financial health. A downgrade by rating agencies or disappointing earnings results can lead to sharp price movements, which may impact CFD traders, especially those with leveraged positions.

Different Ways to Trade Rolls-Royce Shares

When trading Rolls-Royce share CFDs, several strategies can be employed to align with your personal approach & trading style:

• Fundamental Analysis: Evaluate Rolls-Royce’s intrinsic value by examining its financial stability, market standing, and future growth potential.


• Technical Analysis: Study Rolls-Royce’s stock price trends, trading volumes, and historical data to predict future price movements.


• Integrated Analysis: Combine technical and fundamental analyses to understand Rolls-Royce’s stock dynamics thoroughly.

Once a preferred analytical approach is chosen, traders can select a trading style based on their risk appetite, investment horizon, and market engagement:

• Swing Trading: Engage in trades over several days or weeks to benefit from medium-term price shifts, providing flexibility in response to market volatility.


• Position Trading: Hold positions for extended periods to capitalise on longer-term market trends in Rolls-Royce shares, matching a strategic investment plan.


• Day Trading: Execute trades within short timeframes, from minutes to hours, requiring constant monitoring due to the high-frequency nature of this strategy.



How to Trade Rolls-Royce Share CFDs with Plus500 (Step-by-Step)

Here’s a streamlined guide for trading Rolls-Royce shares using CFDs through Plus500:

1. Learn the Basics: Familiarise yourself with CFD trading, including its benefits and potential risks. One useful resource that may help you in your knowledge journey is the Plus500 Beginners’ Guide.


2. Set Up and Fund Your Account: Create an account on Plus500, complete the verification process, and deposit the necessary funds.


3. Access the Platform: Log in to Plus500 to begin trading Rolls-Royce share CFDs.


4. Select Your Approach: Based on your trading strategy, decide whether to take a long or short position on Rolls-Royce shares.


5. Monitor and Adjust: Keep an eye on market trends and manage your trades, adjusting your strategy as needed.

Conclusion

In conclusion, Rolls-Royce Holdings Plc stands as a symbol of luxury and engineering excellence, with a rich history and a notable presence in both traditional and innovative markets. For traders, understanding its stock dynamics and leveraging CFDs can offer trading opportunities but also requires careful consideration of the associated risks.