Trade FTSE 100 Shares
Certainly, the most popular individual shares for spreadbetters belong to the FTSE 100. A good starting point for anyone wanting to use spread betting for profit is the list of FTSE 100 shares. The FTSE 100 is made up of the hundred biggest blue-chip companies in the UK market, and as such they represent about 80% in value of the stock market. This equates to about 9% of the global share market. Many of these companies are household names, so you have a starting point for getting to know enough about them to feel comfortable trading them.
Spread Betting FTSE 100 Shares: Company Analysis and Examples
There are 100 companies in the FTSE 100 index, but a total of 102 listings. This is because there are two classes of shares Royal Dutch Shell and Schroders.
Blue chip firms are big and highly liquid meaning that spread traders benefit from very tight dealing spreads and lower margin requirements (i.e. potential of higher leverage) with most providers only requiring 5% or 10% to open positions. In addition, blue chip shares are more responsive to technical analysis and in this sense FTSE 100 equities are more predictable than smaller stocks whose moves may be controlled by market makers. In contrast, FTSE 100 shares are automatically traded on an exchange and traders should be able to enter and exit positions easily irrespective of the trade size. For instance companies like Rio Tinto and Barclays are very liquid, highly traded, and volatile within a narrow range. For spread betters and traders who day trade the markets this means that there will always be a certain degree of movement and potential profits to be made by employing technical analysis. However, arguably, the skills necessary to trade such small movements may be unfamiliar to beginner investors so some think the FTSE 100 may not the best place to start trading.
Because they are the largest companies in the UK, blue chip stocks are also heavily involved in the world markets with most being multinational in nature, which means that international happenings and economic stimuli like Quantitative Easing programmes (printing money by another name) have an effect on their share prices, another factor to be noted in your research. They are less volatile than smaller companies which means smoother movements, but this is a positive factor when you are learning to trade as you stand less chance of being caught out by large swings in prices.
Some of the most traded FTSE shares include Lloyds, RBS (RBS), Barclays (BARC), BP, BHP Billiton (BLT) and Tesco. One sector of the FTSE 100 which has been particularly hard hit in the last year is banking. It’s no secret that the financial sector has suffered considerably as a result of the global credit problems, and it is likely that there are further losses to come. Banks have had to make enormous write-downs on their accounts, which has resulted in share prices plummeting, and there is evidence that we are not out of the woods yet. The banks that are leading the slide are household names, such as Lloyds, RBS, and Standard Chartered. Banking shares are likely to be net beneficiaries from QE stimulus so keep a watchout for the possibility of further Quantitative Easing down the road from the USA, the UK and the Eurozone – especially so because the fiscal tightening that is currently evident across much of these geographies will put extra emphasis upon monetary policy to keep fragile recoveries alive.
In contrast to this, the mining sector is strong, reflecting increasing prices for basic materials which in the long-term may become in short supply due to the rise in demand from emerging markets. This includes companies such as Xstrata, and Rio Tinto.
The oil sector is a particularly troublesome one at the moment, with the shares in BP looking especially unsafe. The massive oil leak in the Gulf of Mexico has been repeatedly underestimated by the experts, and this continues to put pressure on the value of the company although it does appear that the worst is behind it now.
Many FTSE 100 companies also pay out decent dividends and are not going out of business easily. There are several advantages to spread betting on shares in the FTSE 100, compared to other ways of trading. For a start, spread betting is a leveraged product, meaning that your money can go further than if you traded in shares via a traditional broker which opens the possibility of bigger profits or losses on trades. Since you don’t actually own the underlying equity it is also as easy to take a short position as a long one, meaning that you can profit from share prices falling as simply as from them rising. It’s true that contracts for difference have these same advantages, but where financial spread betting scores over CFDs is in the taxation. Betting is tax exempt, but tax is due on profits from trading contracts for difference.
For some traders and traditional buy and hold investors, of course, these benefits may not offset the time and skill needed to dedicate researching the markets. However, certain markets are easier than others to manage, with FTSE 250 shares being an ideal place to start.
Join the discussion