In this brief guide to spread betting on the FTSE 100, we will first explain what the index is, then set out the benefits of trading the FTSE 100 and finally explain how to trade it.
The FTSE 100 Index
The FTSE 100 is a weighted stock market index of the share prices of the 100 most capitalised companies trading on the London Stock Exchange (LSE). As such it represents about 80% of the total value of the LSE.
The FTSE 100 is, under normal circumstances, much less volatile than the prices of some individual stocks, which is one of the reasons why many novice traders prefer to trade this index rather than individual company shares.
The price of an individual share can move 10 to 15% during a single day in reaction to an unexpected incident, e.g. the death of a key employee, a new product range being launched or a takeover offer. On the other hand, the FTSE 100 index is normally considered to be more stable, although often moves between 1 and 2% in a day.
A Guide to Spread Betting on the FTSE 100
You can of course invest in all the shares that form part of the FTSE 100, but for many traders a derivative product like spread betting or CFDs can be a simpler option.
To trade the FTSE 100 via spread betting, you will need an account with a financial spread betting company. These spread betting accounts are often free to open, although subject to status, terms and conditions. Several firms also have demo accounts where you can trade under real life circumstances without actually risking any money.
Use of a demo account can help you become more familiar with what technical and fundamental factors affect your chosen markets.
It is also important for investors to have access to decent trading platform that can import live prices and display graphs of price movements and technical indicators. Most spread betting companies will give access to such trading platforms free of charge to their account holders.
One advantage of trading the FTSE 100 with spread betting is that normal market hours are between 08:00 and 16:30, London time, five days a week. Several spread betting firms, like Financial Spreads, provide out of hours trading on key markets, like the FTSE 100 and other popular stock market indices, forex and commodities.
In addition, there is no stamp duty payable on spread betting in the UK at the moment and it is also currently exempt from capital gains tax in this country.*
For a fully worked example of how to spread bet on the FTSE 100 see FTSE 100 Spread Betting.
A Guide to Spread Betting on the FTSE 100 - Spread Betting Companies
The following spread betting companies offer spread betting on the FTSE 100 as well as a wide range of other stock market indices, foreign exchange, commodities and stocks and shares.
FTSE 100
FTSE 250
DAX 30
CAC 40
Other European Indices
European Stock Market Index spread betting markets may also be available through other companies. Notes.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'A Guide to Spread Betting on the FTSE 100', Feature by D. Jones, last update: 1-Aug-11
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