Stock Market Index Spread Betting Guide

Stock Market Trading



Live Stock Market Index Chart

The chart below is from Plus500 and it’s based on their CFD prices. Nevertheless, it’s useful for a quick check of the markets.

We have defaulted to the FTSE 100 (UK 100) but you can search for other markets, we’ve also listed the search terms in the ‘stock market names’ table below.



Warning on the Trump Bump

If you’re speculating on the Trump’s boost of the markets take a quick look at this, Caution: The Trump Bump Could Go Belly Up.



Stock Market Index Spread Betting Comparison

navigate_beforeComparison Scroll navigate_next
Company Index Min
Stake
UK
100
Spread
Germany
30
Spread
Wall
Street
Spread
S&P
500
Spread
NASDAQ
100
Spread
Japan
255
Spread
Apply
Financial Spreads Review £0.50 0.8 (5) 1 (2) 1 (4) 3 0.5 8 Apply

Review
City Index Review £1 1 (+) 1 (+) 1.6 (+) 6 1 (+) 8 (+) Apply

Review
ETX Capital Review £0.50 1 (2,6) 1 (2,6) 1 (2) 5 1 (2) Variable Apply

Review
IG Review £1-5 1 (4) 1 (5) 1.8 (5.8) 5 (9) 1 (3) 8 (30) Apply

Review


Where to Get Live Prices, Charts and Trade Stock Market Indices

All spread betting firms offer the key stock indices and they will always come with live prices and live charts.

A few options include:
  • arrow_forwardFinancial Spreads
  • arrow_forwardIG
  • arrow_forwardInterTrader
  • arrow_forwardETX Capital
(Others include but are not limited to City Index, CMC Markets, DF Markets, GKFX, LCG, OANDA, Spreadex and 3D Markets).


Popular Index Markets

Index Code for Chart
Above
Typical Names
ASX 200 SPI200 AUS 200, ASX 200, ASX, Australia 200
CAC 40 FCE CAC, France 40
DAX 30 FDAX
Dow Jones YM US 30, USA 30, Wall Street, Wall Street 30
FTSE 100 UK100 UK 100
MDAX 50 F2MX Germany MCap, DAX Mid Cap 50, MDAX
NASDAQ 100 NQ US Tech 100, US-Tech 100
Nikkei 225 NIY Japan 225
S&P 500 ES US 500, US 500, SPX 500

Note that the Nikkei really isn’t that popular. It’s not that people don’t want to trade the Japanese stock market it’s more that:
  • arrow_forwardThe trading hours are not very convenient for Europeans
  • arrow_forwardThe European financial press doesn’t write about Japanese firms unless there’s a scandal or a Nintendo story
  • arrow_forwardThe Nikkei has a strange mid-day break

Semi-Popular Index Markets

Index Code for Chart
Above
Typical Names
Euro Stoxx 50 FESX Europe 50, Euro Stocks
Hong Kong Hang Seng HSI Hong Kong, Hang Seng, HK, (careful HK40, HK42, HK43 and HK50 are different markets)
IBEX 35 IBX Spain 35
MIB 40 FIBi Italy 40, FTMIB, MIB

Watch out if you trade some these markets, particularly the Italy 40 and Spain 35. Despite the wide spreads (often around 8pts) these markets are still quite popular.

However, they are often highly volatile. Volatility tends to make a market popular but these are markets are only “semi-popular”, that’s probably because these markets are so volatile it’s very easy to lose quickly on them.

And let’s be fair, many of us follow the markets a lot, but what do we really know about the Italian / Spanish stock markets? or the Italian / Spanish economy? Or the key companies in these stock markets?

Perhaps we know enough to take a medium-long-term view. However spread betting if often a short-term game, if so, most of us know too little, and have too little data to trade these markets.


Unpopular Index Markets

Some markets just aren’t that popular and there are a variety of reasons for this:
  • arrow_forwardAgain, they / the companies that make up the index aren’t covered much in the European financial press
  • arrow_forwardWide spreads
  • arrow_forwardThey are only offered as futures markets
  • arrow_forwardThey are not available on that many platforms (a bit of a self-fulfilling prophesy)

Index Code for Chart
Above/Below
Typical Names
AEX 25 FT Netherlands 25, AEX
Athex 20 FTASE Greece 20
ATX 20 ATX Austria 20
OBX OBX Norway 25
OMX 20 OMXC20CAP Denmark 20, Copenhagen 20
OMX 30 OMXS30 Sweden 30, Stockholm 30
SMI 20 FSM Swiss 20, Switzerland 20
WIG 20 WIG20 Poland 20

Stock Market Guide Prices:

What is a Stock Market Index?

An index is simply a grouping of shares e.g. the FTSE 100 is an index of the companies in the FTSE 100. The DAX 30, aka Germany 30, is an index of the 30 companies in the DAX 30.

This quick video guide from IG takes a look at what constitutes a stock market index:



Stock Market Index Names – Why Not Use the ‘Normal’ Name?

First things first, for the plural of ‘index’ we tend to write ‘indices’ because we’re based in the UK. The American version is ‘indexes’.

The table below covers the typical names that you’ll see on the spread betting and CFD platforms.

E.g. the FTSE 100 is normally called the UK 100, the Dow Jones is often called the Wall Street or US 30.

Why? It’s all to do with intellectual properly (IP) rights.

For a spread betting company to use a FTSE 100 price feed that is one thing and one nasty cost. Actually using the “FTSE” itself name comes with a very hefty IP price tag.

Editor’s note. IG are the only firm with deep enough pockets to actually pay for the IP rights to say “FTSE 100” on their platform, almost everyone else says “UK 100”.


Why Trade a Stock Market Index?

Indices allow spread bettors to trade on the performance of either a group of shares, or entire stock markets.

Indices are sometimes seen as less risky than investing in individual stocks due to lower levels of volatility with a whole index.

You can sometimes get both “daily rolling bets” and “futures” on indices. Daily rolling bets, aka ‘Daily Funded Bets’ aka ‘DFBs’ are far more popular because of the tighter spreads.

View of 'The City'
What a Lovely View of ‘The City’


About Index Spread Betting

The most popular financial spread betting markets are normally the stock indices. These indices represent the combined value of some of the largest companies in the world.

The FTSE 100 Index is the basis for the most popular financial spread betting market in the UK. The FTSE 100 includes the likes of energies companies BP and Shell as well as banks such as HSBC and Barclays.

By financial spread betting on the FTSE 100 to go up or down you are speculating on the aggregate movement of all of the stocks listed in the index. A comprehensive understanding of the financial markets is required owing to the variety of sectors that are often represented.

Having said that, Indices can make exciting trading given the nature of the markets. For example, throughout 2010 the large mining companies and financial institutions have heavily influenced the movement the FTSE 100.

‘Defensive’ pharmaceuticals’ shares such as those of GlaxoSmithKline and Reckitt Benckiser have been less volatile and have therefore had less impact on the FTSE 100.

Some of the most traded indices markets include:
  • arrow_forwardFTSE 100: a share index that lists the performance of the top 100 UK listed companies. They are ranked by their market capitalisation. This index is also known in financial spread betting as the UK 100
  • arrow_forwardDow Jones: a share index that reflects the performance of the top 30 US stocks. Also known in financial spread betting as ‘Wall Street’
  • arrow_forwardUS S+P 500: a share index that defines the broader US stock market, it tracks the performance of the top 500 American firms
  • arrow_forwardGerman DAX 30: a share index of the top 30 German companies in terms of order book volume and market capitalisation
  • arrow_forwardFrench CAC 40: a share index listing of the 40 largest companies on the Euronext Paris, the largest French stock exchange
  • arrow_forwardJapanese Nikkei 225: Refers to the price-weighted average of the top 225 firms in the Tokyo Stock Exchange
Financial spread betting on stock market indices allows investors to go either long or short. If, after your research, you feel that the combined value of the companies in the Index will decrease then you can spread bet on the Index to go down. Naturally, you can also spread bet on the Index to go up.

However, financial spread betting on indices is a leveraged form of trading and so whilst this increases your potential upside you can also lose more than your initial stake. This means that you need to be fully aware of the potential benefits and pitfalls before placing any spread bets.

It should also be noted that spread betting on indices is currently tax free*.

If you are looking to trade individual equities, see ‘spread betting on shares guide’.


How to Spread Bet on Indices

Let’s assume you are interested in financial spread betting on the FTSE 100, you go on a spread betting site, e.g. FinancialSpreads.com, and see that they are offering the current quote:

FTSE 100 Rolling Daily: 5447.0 – 5448.0

This is what happens…

Market: FTSE 100 Rolling Daily
The Spread Betting Quote: 5447.0 – 5448.0
This Means That: You can speculate on the FTSE 100 Rolling Daily market going:

  arrow_upward  Higher than 5448.0, or
  arrow_downward  Lower than 5447.0

This is a Rolling Daily spread betting market meaning that it does not have an expiry date. If you decide not to close your position and the session ends then your position will automatically roll over into the next session.

Note: if a trade is rolled over then you will either be charged or credited for overnight financing based on whether you are speculating on the market to go down or up.

For additional details also see Rolling Spread Bets.
Points Traded: Spread bets on the FTSE 100 market are priced in £x per point.

Where a point is 1 point of the index’s price movement.

E.g. if the FTSE 100 moves by 30 points then you would win or lose 30 times your stake.
Stake Size per Unit: You choose your stake per point, e.g. £2 per point, £5 per point, £10 per point, £20 per point etc.
Quick Staking Example: If, as an example, you went with a stake of £3 per point and the FTSE 100 moves 24 points, you would win or lose £3 per point x 24 points = £72.


Spread Betting Example | Taking a Long Position on the FTSE 100

Financial spread betting on the index to go higher

You Decide to Buy or Sell: The FTSE 100 to push:

  arrow_upward  Higher than 5448.0? or
  arrow_downward  Lower than 5447.0?

Let’s Assume You Decide to Buy:   arrow_downward  Higher than 5448.0
You Choose Your Stake Size, Choosing: £2 per point
Now What?
  • You gain £2 for every point the FTSE 100 goes higher than 5448.0
  • You make a loss of £2 for each point the FTSE 100 falls lower than 5448.0
When Speculating on a Market to Go Up Your P&L = (Closing Value – Opening Value) x stake per point
 
Scenario 1 The FTSE 100 climbs and the spread betting market adjusts and moves to 5494.3 – 5495.3.
Close and Take a Profit? You could opt to leave your spread bet open or close it and take a profit. In this instance you decide to close your trade by selling at 5494.3.
Your P&L = (Closing Value – Opening Value) x stake per point
(5494.3 – 5448.0) x £2 per point
46.3 points x £2 per point
Your P&L = £92.60 profit
 
Scenario 2 The FTSE 100 falls and the spread betting market drops to 5407.1 – 5408.1.
Close and Restrict the Loss? At this point, you may choose to keep your spread bet open or close it, i.e. close your position and limit your loss. For this example, you choose to close your FTSE 100 spread bet by selling the market at 5407.1.
Your P&L = (Closing Value – Opening Value) x stake per point
(5407.1 – 5448.0) x £2 per point
-40.9 points x £2 per point
Your P&L = -£81.80 loss


Worked Spread Betting Example | Taking a Bearish View of the FTSE 100

Spread betting on the index to decrease

You Now Select Whether to Buy or Sell: The FTSE 100 moving:

  arrow_upward  Higher than 5448.0? or
  arrow_downward  Lower than 5447.0?

You Might Decide to Go Short:  arrow_downward  Lower than 5447.0
You Select Your Stake Size, Let’s Assume You Choose: £3 per point
So What Happens Next?
  • You make a loss of £3 for each point the FTSE 100 pushes above 5447.0
  • You gain £3 for each point the FTSE 100 falls lower than 5447.0
If You Are Selling a Market Your P&L = (Opening Value – Closing Value) x stake per point
 
Scenario 3 The FTSE 100 slips and the financial spread betting market moves to 5404.3 – 5405.3.
Close for a Profit? You may choose to let your trade run or close it in order to take your profit. In this example you choose to close your FTSE 100 position and buy at 5405.3.
Your P&L = (Opening Value – Closing Value) x stake per point
(5447.0 – 5405.3) x £3 per point
41.7 points x £3 per point
Your P&L = £125.10 profit
 
Scenario 4 The FTSE 100 climbs and the spread trading market is revised and changes to 5482.8 – 5483.8.
Restrict Your Loss?You could decide to leave your position open or close it, i.e. close your spread bet and limit your loss. In this example you decide to close your position on the FTSE 100 by buying at 5483.8.
Your P&L = (Opening Value – Closing Value) x stake per point
(5447.0 – 5483.8) x £3 per point
-36.8 points x £3 per point
Your P&L = -£110.40 loss


FTSE 100 Notes:: Financial spread betting prices taken from by Financial Spreads, 2 November 2011

Stock Market Index Spread Betting Guides

European Stock Market Indices

American Stock Market Indices

Other Global Stock Market Indices

AuthorAlex Turner

Senior Editor, SpreadBetMagazine