The Ftse 100 - How Can You Successfully Trade This Index?
The FTSE 100 is the UK's benchmark index because it includes the 100 biggest companies (as determined by market capitalisation)
. So it therefore follows that many people want to trade this index. Thankfully there are several ways you can successfully trade the FTSE 100.
First of all you can open a spread betting account, deposit some money, and open a long or short position. If you are quoted a daily price of say 5898-5900, you could open a long position at 5900 or a short position at 5898, depending on whether you think the market will go up or down before the end of the day's trading session.
The more right you are, the more profits you make. So if you were to open a long position, for instance, and the market closed the day at 5940, you would make a total profit of 40 points multiplied by your stake per point.
You can also trade long-term positions as well using this form of trading. All you do is trade one of the markets that expire several months away from the current date.
Another way you can trade the FTSE 100 index is by trading options. This is not my area of expertise, but in simple terms you can buy call options if you think the price will go above a specified level, and but put options if you think the price will go below a specified level.
There is much more to options trading than this, and the calculations can be quite complex, particularly when you trade options that are out of the money. However it does enable you to profits from any gains or falls in the index.
Finally you may also like to trade the FTSE 100 like you would a stock. This has become really easy to do in recent years thanks to the invention of ETFs. By investing in a FTSE 100 ETF you can profit from any price rises. So this creates additional trading opportunities in a bear market because you can buy one of these ETFs for the long-term or drip feed your money into these ETFs at various prices.
The point is that there are many different instruments you can use to trade the FTSE 100. Spread betting and options contracts are the best ones to use for short-term trades (less than a year, for example), whilst ETFs are perfect for anyone looking to take a long term position on this index.
by: John Robertson
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