FTSE futures are used to speculate on the FTSE 100 index which is made up of the 100 most capitalized stocks on the London Stock Exchange (LSE). FTSE 100 firms account for more than 80% of the entire market capitalization on the London Stock Exchange (LSE).
The FTSE 100 futures contract is the fourth-largest contract traded at NYSE Liffe, with an average daily volume of 138,000 trades, and is available for investors to trade 20 hours a day.
FTSE futures are quite stable and tend not to fluctuate wildly even in the event of a fundamental economic meltdown, the likes of which is currently gripping the E.U. Even now FTSE futures are priced at a reasonable rate of ten times the estimated value of the FTSE 100.
This means if the FTSE 100 has a price of six thousand points, the nominal value of a FTSE futures contract will be 60,000. The actual and initial margin requirements of the futures contract are currently $3,000. Hence each index point movement on the FTSE 100 index is worth $10.
FTSE Futures Trading Example
Let’s assume the FTSE 100 index is at 6,000 points and you anticipate the market to a rise to 6,200. So you decide to purchase a FTSE futures contract with a 2 month expiry date.
If the FTSE 100 index climbs to 6,200 you would receive profits of $2,000 (as each FTSE 100 index point is valued at $10.00) however if it the market remains below 6,200 during the 2 month time period you would lose $2,000.
Mini FTSE futures
The Mini FTSE futures contract is quite new and at the time of writing is not currently available to trade in the U.S. But if you have access to a European broker you should be able to get access to it. Just like the highly popular E-mini S&P 500 futures contract, the Mini FTSE 100 Index futures contract enables you to trade in the movement of the entire FTSE 100 Index for a fraction of its cost.
The Mini FTSE 100 Index has a value of just £2 per index point. In money terms this means its overall value is double that the index. (about £12,000 with the FTSE at 6000). This is a fifth of the size of a regular contract. Initial margin on the contract is a relatively modest £800. So that means if the futures price falls by say 50 points, after you’ve bought one contract, you lose £100 with the mini as opposed to £500 that would have been lost with a regular contract.
Where Can you Trade FTSE Index Futures?
Trading standard FTSE Index futures shouldn’t be a problem, most major retail brokers in the U.S offer access to them. But if you find your broker doesn’t you can always change to one that does, optionsXpress offer trades on the FTSE 100 Index (LFT) through their standard platform, plus they have some excellent training resources that give you further insight into futures trading.
Trading the FTSE is just like trading any other index future, the one advantage the FTSE has over other indexes is that it remains relatively stable even in times of economic crisis. This makes it perfect for beginners to learn the ropes as it has enough liquidity to maintain profitable trends and provide accurate charting.