Ftse Futures Contracts Are The Best To Work With
Learn how FTSE futures contracts operate and see examples of how day traders use them to earn.
The most important aspect is that the FTSE futures is that it is used as a method of speculating on the FTSE 100 index which is made up of the 100 most capitalized and blue chip stock company’s on the LSE. FTSE 100 firms account for more than 80% of the entire market capitalization on the British Stock Exchange. The index had a high of 6,950 in 1999 which has not been seen since this period. The top company’s on the index are currently
- Royal Dutch Shell
- BP
- HSBC
- GlaxoSmithKline
- Vodafone Group
- Barclays plc
- HBOS
- AstraZeneca
- Anglo American
Despite terrible market performance the FTSE futures do not have the tendency to fluctuate with sharp movements in the event of fundamental economic shocking events. Due to this is at times it is quite risky to trade the market. FTSE futures are actually priced at a reasonable rate of ten times the estimated value of the FTSE 100. This means if the FTSE 100 has a price at six thousand points, the nominal value of FTSE futures contract will be 60,000. The actual and initial margin requirements of the futures contract is currently three thousand ($3,000.00) coupled with a maintenance margin being the same three thousand dollars ($3,000.00). Hence each index point movement on the FTSE 100 index would be worth or valued $10 on any open futures contract.
Assuming the FTSE 100 index is at 6,000 points and Colin speculates and anticipates the market to a rise to 6,200 and decides to hold this specific position for no more than sixty days. Colin purchases a FTSE futures contract with a 2 month expiry date paying a nominal fee. If the FTSE 100 index climbs to 6,200 Colin would recover profits of $2,000 (as each FTSE 100 index point is valued at $10.00) however if it does and the market remains below 6,200 during the 2 month time period then Colin would have lost $2,000.00
This is the basic concept behind FTSE futures. Most individuals believe that FTSE futures cannot provide guaranteed protection or hedging against the market. Betting directly on a traded futures contract such as the quarterly FTSE futures requires no adjustment on prices as the carry cost is already included in the futures price. However individuals will not actually prefer trading the stock market rather than trading FTSE futures as the cost of trading stocks is $1.00 per point versus the cost per point on the futures is $10.00.
Most companies use a $ 4.00 to $6.00 spread in FTSE futures this is why most investors consider them spread bets. The real spread for these contracts is ½ a point of $5.00. The index futures and options are excellent individual equity products.
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