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How Is The Ftse100 Traded?

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I've just enrolled with IGindex and I see that the FTSE100 is traded for 24 hours a day.

Presumably I can put a stop time on my bet, of say 4:30 when the UK stock market ceases?

Any further knowledge on the FTSE100 would be appreciated. Presumably it is traded in NY and HKG, etc.

cheers,

Nick

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I've just enrolled with IGindex and I see that the FTSE100 is traded for 24 hours a day.

Presumably I can put a stop time on my bet, of say 4:30 when the UK stock market ceases?

Any further knowledge on the FTSE100 would be appreciated. Presumably it is traded in NY and HKG, etc.

cheers,

Nick

The IG index instrument will be tracking the FTSE futures contract, which can be electronically traded out of normal stock market hours. The futures contract is a contract to trade one "lot" of the basket of shares that make up the FTSE at a fixed date in the future.

The futures contact ends up tracking the actual FTSE via the actions of arbitrage firms. These people will trade to close any mis-match in value between the contract, and the basket of shares it represents.

If some bad news comes out overnight, when the markets are closed, the futures contract is may sell off. When the markets open the next day, the futures contract is worth less than the stocks it represents. An instant profit can be gained by selling the actual stocks, whilst buying the futures contract. This bids up the futures, and depresses the stocks, until within a few seconds the FTSE and it's futures cotract, are pretty much locked.

So basically, IG will actually be buying and selling futures contracts behind the scenes.

edit : to add. yes, you stop will be activated if the futures market is open, but that won't be a full 24 hours, 7 days a week. If the market gaps down between trading sessions, you can lose a lot of money, including more than you deposited. in the case of IG, you can use "guaranteed stops", which wil be triggered at the set level, even if the market is closed or moving very fast. You pay a wider spread if you use these, but they are probably worth it if you're holding overnight.

Edited by fildi101

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Thanks. I've noticed that. There can be a sudden jump at the start of trade. I suppose it's best to keep away from that, and wait until a more gradual change is seen?

Can you please supply more details about 'futures'. I don't understand how this applies to the FTSE100 when the shares in the basket are not being traded, that is, after 4:30 pm and before 8:00 am.

Thanks again,

Nick

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