FTSE Options
Learn about the FTSE options and contracts and how they are very profitable to day traders.
FTSE options are actually contracts for differences because there exists no underlying asset. FTSE options contracts work on a basis that it is $10 on each index point. Hence the cost of one option contract that will protect any investment portfolio worth $62,500 (this is ten multiplied by the FTSE index value) is going to be just $2,750. The contracts are settled on the basis used by the EDSP or the Exchange Delivery Settlement Price. This figure is reported at the end of the last dealing day.
The system known as Euro Track It also buys and/or writes options on the FTSE index. Several equity options are traded in 3 month cycles while some FTSE options go in a lot of monthly cycles, quarterly, semi-annually, yearly and even up to 24 months as well. Many investors know that trading FTSE options involves much more risk than trading less volatile equity options. This is specifically based on the FTSE indices volatility. Writing FTSE options which has fluctuating prices can be detrimental as movements in margin are sudden. The framework to any investment model with option contracts based on the volatility of the FTSE index is a very risky one and you must rely on the expertise of investment managers.
Investors can buy and sell Ftse options through Investment Banks. The FTSE stock markets start the trading session based on Wall Street’s performance for the previous day. However economic data releases make dealers and day traders cautious when trading FTSE options specifically when the option expiries in the US trading day. A double witching FTSE options (double witching is when only two classes (any two) of options contracts are expiring simultaneously or on the same day. The classes’ stock options, index options, and index futures. So option contracts and futures contracts expire on the exact same day. Double and triple witching is very risky and volatile as arbitrage trading leads day traders to attempt to close positions.
[tags]FTSE Options,FTSE Futures,Contracts,Volatility[/tags]
