Index futures are the most widely traded
futures markets by the retail and professional investor.
The major exchanges have recognised their popularity and
the need to compete with both the spread betting and CFD
providers and so have taken the decision to launch mini
contracts to sit alongside the standard contracts allowing
a more flexible access to these markets.
The standard contracts remain highly liquid and traded but it is
the new mini and micro contracts that are winning favour with the
new and relatively inexperienced trader. Most index futures
contracts are traded on a quarterly basis although some, like the
French CAC 40 and the Swiss Market Index (SMI) are traded
monthly.
When trading index futures it is essential that you understand
what monetary value each 'lot' in the market has as well as the
trading times and the expiry date of the contract you are trading,
remembering that the expiry date is not always the last trading
date.
Expensive mistakes have been made in the past where new traders
have found themselves trading contracts that have a value of 10
times the level they believed or trying to close positions after
the last day of dealing. Your futures broker will be able to give
you this information (we have listed some of the most popular
contract specifications below) or you can go to the exchange
websites where they list all of the contracts they offer.
The most popular index futures are the FTSE, the S&P500, the
German Dax 30, the French CAC 40, the Dow Jones and the Nasdaq 100.
The Japanese Nikkei and the Hong Kong Hang Seng are widely traded
in Asia but due to the trading hours of these markets being
overnight UK time they aren't overly popular with the UK trading
community.
FTSE 100 Index Futures
This is a quarterly contract (expiries in March, June, September
and December) and is a prediction of where the
underlying FTSE100 market will be at these times. The market
is traded on Euronext and has an expiry date of the 3rd Friday of
the contract month with the contract expiring between 10.10 and
10.30am on that day. This contract is cash settled.
S&P 500 Index Futures
This is a quarterly contract (March, June, September and
December) and is a prediction of where the underlying S&P 500
market will be at these times. The market is traded on the CME and
has standard, mini and micro contracts available. These contracts
expire on the 3rd Friday of each contract month and is cash
settled.
GERMAN DAX 30 Index Futures
This is a quarterly contract (March, June, September and
December) and is a prediction of where the underlying DAX 30 will
be at these times. The market is traded on the Eurex exchange
expiring on the 3rd Friday of each quarter. This market is cash
settled.
FRENCH CAC 40 INDEX FUTURES
This is a monthly contract and is a prediction of where the
underlying CAC 40 cash market will be at these times. The market is
traded on EURONEXT, expires on the last trading day of each month
and is cash settled.
DOW JONES 30 Index Futures
This is a quarterly contract (March, June, September and
December) and is a prediction of where the Dow Jones Industrial
Average will be at these times. The market is traded on the CME and
expires on the third Friday of each contract month. This market is
cash settled.
NASDAQ 100 Index Futures
This is a quarterly contract (March, June, September and
December) and is a prediction of where the NASDAQ 100 will be at
these times. The market is traded on the NASDAQ and expires on the
third Friday of each contract month. This market is cash
settled.
Below is a table of Futures brokers with a few key
account-opening criteria that we believe should be considered when
you are deciding which broker to open an account with. It's not
always about price; finding a broker that suits your style of
trading and your technical requirements can be just
as important as shaving a few pence off of your dealing
costs.