Technical Analysis FTSE 100 Index Futures
About FTSE 100 IndexOn the London Stock Exchange, FTSE 100 futures are symbolized by the ticker UKX. Quotes are calculated in British pounds. Trading hours are limited from 08:00 to 16:30 (GMT+01:00 in summer, GMT in winter).
The FTSE 100 index is also traded on the ICE intercontinental exchange (ticker symbol Z). These are settlement contracts, the size of which corresponds to the rate of FTSE 100 times £10. They are traded from 20:00 to 16:00 next New York time (GMT-4). The minimum change in the futures price is 0.5 points, which corresponds to 5 pounds per contract.
On the Chicago Board Options Exchange (CBOE: FT1), only mini-contracts for the FTSE100 index are available. Like the contracts on the Intercontinental Exchange, they do not involve physical deliveries and are priced at £10 per pip. They are traded in the CME Globex system from 18:00 to 17:00 the next day Eastern Time (ET). The minimum price change is 0.5 points or £5 per contract.
In trading terminals for retail investors, depending on the instrument, the index can be designated as UK100 or FTSE.
Brief overview of the FTSE 100 indexBy the beginning of the 80s of the 20th century, structural changes began in the stock market associated with the computerization of trade. There was a need for an instrument that would reflect the state of the UK stock market with a minimum delay.
At that time, there were 2 major indices in the UK - the All-Share Index and the Financial Times Ordinary Index. But All-Share was calculated once a day, and the Financial Times Ordinary Index was not weighted by capitalization, geometric averaging was used in its calculation. Over time, the values of the Financial Times Ordinary Index turned out to be underestimated.
This was the prerequisite for the development of a new index, and it became the FTSE 100. It was launched on January 3, 1984, and the base value was taken to be 1000 points. The index is calculated by the FTSE Group, a subsidiary of the London Stock Exchange. A year after the launch, the combined capitalization of the companies included in the basket amounted to £160 billion.
At first, the FTSE 100 was recalculated every minute. After 1995, the values were updated every 15 seconds, and since 1997, the FTSE 100 has been calculated in real time. The index was not calculated on October 16, 1987, on this day the most destructive storm in the last 300 years shook the UK and the FTSE 100 took a break for a day.
FTSE 100 Index for InvestorsThe volatility of the FTSE 100 can be called average for large indices - its quotes per trading day can fluctuate on average from 2% to 5%, which makes derivatives related to it comfortable for both long-term investments and short-term trading.
An extremely significant level of liquidity makes it even possible to carry out scalping transactions with futures on the FTSE 100. In the long term, the FTSE 100, like most similar indices, is prone to the formation of long-term trends, lasting from six months to several years.
To be included in the index, an issuer must meet a number of criteria: be traded on the London Stock Exchange, quoted in pounds sterling or euros, have sufficient liquidity and Free Float.
The composition of the FTSE 100 is reviewed once a quarter - every March, June, September and December.
To be included in the index at the time of the revision, a company must rise to 90th place by capitalization on the London Stock Exchange or higher. To be excluded from the Financial Times Stock Exchange 100, an issuer must move down to 111 or lower in this rating.
The Financial Times Stock Exchange 100 is based on the top 100 listed companies on the LSE. The index stock basket includes companies belonging to the banking sector, chemical and food industries, electronics, communications, media, gas and oil, pharmaceuticals, real estate and many others, which makes it widely diversified.
The largest components of the FTSE 100 include:
- AstraZeneca plc (LSE: AZN);
- GlaxoSmithKline plc (LSE: GSK);
- HSBC Holdings plc (LSE: HSBA);
- British American Tobacco plc (LSE: BATS);
- Diageo plc (LSE: DGE);
- BP plc (LSE: BP);
- Rio Tinto plc (LSE: RIO);
- Reckitt Benkiser Group plc (LSE: RB);
- Royal Dutch Shell plc (LSE: RDSA, RDSB);
- Unilever PLC (LSE: ULVR).
The FTSE 100 is a capitalization-weighted index. The basic calculation formula looks like this:
- P - is the share price;
- N - is the total number of shares;
- F - free float adjustment factor or correction factor that takes into account the number of shares in free float;
- D - is a special divisor.
Like any major index, the FTSE 100 has a family of sub-indices, these include:
FTSE 100 Total Return Index (TRIUKX) - is a total return index similar to the FTSE 100, which also takes into account the reinvestment of dividends in the calculation.
FTSE 100 Net of Tax Index (UKXNUK) - is an indicator calculated on the basis of the same stocks as the FTSE 100 Total Return, but adjusting dividends received for the amount of tax.
FTSE 250 Index (MCX) - is an index that includes the companies that are next in terms of capitalization after the FTSE components.
FTSE 350 Index (NMX) - is an indicator that combines the components of the FTSE 100 and FTSE.
FTSE All-Share Index (ASX) - is a general UK stock market index covering 98-99% of its total capitalization.
FTSE SmallCap (SMX) - is an indicator of the health of small cap companies listed on the London Stock Exchange. It consists of stocks following the FTSE 350 components in terms of capitalization.
FTSE Global All Cap (GEISAC) - is a global index that includes shares of about 7,400 companies of various capitalizations from 47 countries.
FTSE All-World (FTAWORLDSR) - is another global indicator with about 3,900 stocks from over 45 countries.
FTSE Global Small Cap (GEISSC) - is a global index of small cap stocks covering about 4,400 issuers in 47 global markets.
FTSE Developed - is an index from the FTSE global line that demonstrates the state of developed world markets.
FTSE Emerging (AWALLE) - is a global indicator of emerging markets, which includes 1,000 stocks.
The FTSE AIM UK 50 Index (AIM5) - is an index of the top 50 UK companies in the Alternative Investment Market (AIM).
The FTSE AIM 100 Index (AIM1) - is a broader indicator of the UK alternative investment market, consisting of 100 components.
FTSE ORB Index - is the UK corporate bond index.
FTSE ORB Financials Index - is an indicator of British corporate bonds issued by companies from the financial sector.
FTSE 100 Declared Dividend - Dividends are accounted for as declared by the company, excluding taxes.
FTSE 100 Dividend Index - RDSA Withholding - the same as the previous one, but an exception is made for Royal Dutch Shell A shares, a tax of 15% is withheld from these dividends.
ETF on the FTSE 100 indexThere are several ETFs that use the FTSE 100 index as a basis. Here are the most famous exchange-traded funds:
- Ishares Core FTSE100 UCITS ETF GBP (DIST)
- LYX ETF FTSE 100 ACC TH
- Vanguard FTSE 100 UCITS ETF (VUKE)
- L&G FTSE 100 Super Short Strategy (SUK2)
- X FTSE100 Short Daily Swap (XUKS)
- HSBC FTSE 100 UCITS ETF GBP
FTSE 100 is a popular index among traders, there is never a lack of liquidity for a trading instrument, and volatility allows you to earn money even intraday through active trading.
If you look closely at the graph of the FTSE 100 index, you can see that during periods of crisis there are strong drops, but then the index recovers, which makes it profitable for medium and long-term investment.