All You Need to Know about FTSE Futures

The FTSE is an acronym for the Financial Times and Stock Exchange index that represents the hundreds of top companies on the London Stock Exchange. Although there are many FTSE indices like the FTSE 250 and FTSE 350, FTSE futures are only based on the FTSE 100. 

Unlike stock market index futures and other commodity futures, FTSE futures aren’t based on an underlying physical asset. This can make trading and speculation complicated when you’re trying to predict the value of an index that covers 100 individual companies. 

How Does It Work?

The index can be influenced by global economic events, but you don’t have to worry about things like severe weather or the decrease in demand for a particular commodity. Rather, it’s all about focusing on the bigger picture. 

The index futures and those indices that track them can influence each other. This means that the value of FTSE futures can be influenced by the FTSE 100 and vice versa. 

It happens because, for example, futures are traded before the market opens, so if the value of futures rises, then traders will also expect the market to rise.  

At the same time, traders need to be aware of the interconnected nature of leading stock exchanges around the world. While these exchanges might seem isolated from each other, events that have a significant impact on one stock market can also impact others. 

Why Are Specifications Important?

When it comes to FTSE futures contracts, you have to pay attention to the specifications. This is because they will give you a better idea of the margins you’ll have to meet, how much you’ll have to leverage, and other important information. 

LIFFE CONNECT is the electronic platform where FTSE futures represented by the “Z” symbol are traded. The contracts are valued at £10 per index point and move in 0.5 increments. This means that you have to multiply £10 by the current index value to gain the contract’s value. 

At the end of each day, the margin requirements are recalculated by an algorithm developed by NYSE Euronext. However, it’s good to note that they usually fall around the £3,000 mark for initial and maintenance. 

The FTSE presents an opportunity for investors to gain access to Britain's leading stock exchange. It also enables non-British investors to gain indirect access to stocks that they wouldn’t normally trade. 

Novice investors should make an effort to pay close attention to major indices around the world to get a better idea about what can happen when FTSE trading opens. Another factor that demands attention is the Bank of England’s Monetary Policy Committee. This is because they control the country’s monetary policy which will certainly have an impact on the FTSE and FTSE futures.