You may not have heard of FTSE futures, but you would have heard of the FTSE 100 or the Financial Times and Stock Exchange 100 index. The FTSE 100 is basically a stock market index that covers exactly 100 companies that are listed on the London Stock Exchange.
The index was created in 1984 and it has been steadily growing ever since. But it doesn’t stop there as there are plenty more FTSE indices. Some of them are as follows:
Unlike the two examples above, FTSE futures are based on the FTSE 100. As a result, it represents 100 of the biggest enterprises in the United Kingdom based on market cap.
One thing to note at this juncture is that FTSE and other stock market futures are somewhat different. Further, it’s also different from commodity futures like the following:
There’s no underlying physical commodity here, this can be a good or bad depending on your approach.
Trading FTSE can be complicated as you have to try and predict a single index that’s based on 100 different companies. Further, you will also have to take economic factors and global events into account and this can be difficult to do on a daily basis.
But on the bright side, the FTSE index is quite simple as there are no environmental factors to consider. Further, you don’t have to worry about consumer demand for a particular product or the logistics concerning various products.
It’s all about the big picture as you only have to focus on the British economy. You just have to decide if it’s going to do well or not.
The FTSE 100 will influence the value of futures but sometimes the opposite can also be true. In other words, the value of futures will influence the future value of the FTSE 100.
Further, traders need to be aware that major stock exchanges around the world are interconnected. Although the FTSE and the Tokyo stock exchange are quite far apart, what impacts one exchange can affect the other.
When you’re dealing with futures, contract specifications are important as they tell you the margin requirements that need to be met and how much you’ll have to leverage.
So make sure that you look out for the futures symbol “Z,” contract value, the percentage of increments, and index value.
FTSE is a great way to engage in the U.K. stock exchange indirectly if you’re a non-British investor.