We spent Friday at the IX Investor show where there were many people that were looking into the idea of trading the markets using Spread Betting.
A question that often comes up is what to actually trade, when it comes to Indices like the FTSE and the Dow, because on most Spread betting platforms there are several choices of product.
The FTSE 100 Index (aka “the Footsie”) tracks the country’s top 100 companies. As many of you may be aware this list changes depending on who’s doing well and who isn’t. This week Alliance and Leicester, Persimmon, Tate and Lyle and Home Retail Group all fell out of the FTSE 100. This is a reflection on how tough Banks, House Builders, Retailers and Food companies (respectively) are doing it right now.
So who replaced them? Fine British names like Petrofac and Ferrexpo joined Drax Power and Invensys.
Petro-who? I think I know what it does based on the name; and it sounds like it likes Oil at £139 a barrel! Petrofec is an Oil service company; a truly worldwide operation.
Ferrexpo is a Ukrainian mining company.
The FTSE 100 reads like a who’s who of international powerhouses these days, whereas 10 or 20 years ago it read like a who’s who of the British High Street.
Now here’s one thing to think about while we ponder the make-up of the Index: It always champions the strong and weeds out the weak. If a company performs badly, or if they are in a struggling sector, they can fall out of the Index.
It’s the mining companies that have been the stellar performers in recent years, and the FTSE is now chocker-block with them. As the Banking Stocks continue to fall like lead balloons their effect on the overall index decreases. So what you’re trading when you buy and sell the FTSE 100 is very different to what you were trading even a couple of years ago.
But back to our initial concern: The different products on offer on the Spread Betters platforms.
Most firms seem to offer at least two choices, the main two being a rolling “Cash” product or the “Quarterly/Forward” contract.
The rolling/cash merely tracks the underlying Index and settles against where that finishes each night.
The “Quarterly” or “Forward” is based on the FTSE 100 Futures and is, in my humble opinion, the best one to trade, especially if you want to use our daily reports! We write our reports on the Futures contract, currently for expiry in September (it trades for delivery in September, December, March and June, by the way), and this is what most Spread Bet firms will be referencing their quotes from.
If you want to trade the daily rolling contracts you would need to work out the difference between it and the Futures before you can make firm use of our levels. The Futures should trade at a premium to the underlying, and at the moment in the FTSE that’s about 28 points.
If you have any further questions feel free to contact us via the button in the Member’s Area. We always aim to help our Members get the most out of the service.