Spread betting on the France 40 is convenient for the UK investor as the markets are open at similar times, unlike trading in the USA or in Asia. Therefore this index provides an alternative if you find that the UK markets are choppy or unpredictable. It is a fairly stable index, though moves up to 400 points have been seen in some weeks.
CAC 40 (France 40)
The France 40 is a capitalization weighted index of the top 40 companies in the French stock market, which is traded in the Paris stock exchange. The 40 companies are picked out of the top 100 in market capitalization and activity. In a similar way to the DAX 30, the companies included in the CAC 40 are reviewed on a quarterly basis and chosen from the hundred to be the most relevant companies. At each review, the companies listed on Euronext Paris are ranked by the previous 12 months’ performance and forty are chosen for inclusion. The market hours are between 07:00 and 17:15 GMT. It is almost entirely composed of companies based in France, though with the international marketplace you will have heard of many of them.
The France 40 is also sometimes called the CAC 40, and it started in 1987 with a preset base value of 1000. It has been up to nearly 7000, but has now settled down between 3000 and 4000. There is a limitation that none of the companies in the index can constitute more than 15% of the value. They include such companies as Total Oil and Gas company, Renault automobiles, the banking groups BNP Paribas and Societe Generale, and L’Oreal. Although the companies are based in France, nearly half of the listed shares are owned by foreign investors from Germany, Japan, the UK, and the USA, which is more than on virtually any other national stock market. This is probably because the companies are widely recognized as international suppliers.
Although France is considered a lesser financial member of Europe, with the tradition and strength of the UK, and the power of the German economy overshadowing it, it is still a very powerful country in the markets, especially because of the international flavour of the companies.
Whenever you are spread betting, you should have a clear idea of your strategy and how you’re going to implement it. It’s best if you can follow the index for a few weeks before putting in money, and you should pay attention to a particular quirks, such as how it reacts at the market open and close, and whether these are dangerous volatile times.
The French 40 provides a better opportunity for the novice spread better than some other indices, as it may not punish you so severely if you get it wrong. However, your betting plan must always take into account that the index can go against you a lot of the time. The experienced spread better will have a plan for exiting the bet taking a minimal amount of loss, should the index prove hard to anticipate.
So if you are looking for a variation from your usual markets, but with the advantage that there is some familiarity and regular timing to the France 40, then you may want to consider adding some knowledge of this index to your experience.
France 40 Spread Betting
The 40 major French companies that comprise the France 40 index are fairly familiar to the European spread better. The France 40 provides an additional opportunity to find a market to bet on any time that you want to try a change, or that you find the indices that you traditionally spread bet on are not behaving.
The current quote for a rolling daily spreadbet is 3145.5 – 3147.5, a spread of two points which is quite reasonable, even if not as competitive as the “major” spreads. If you decide that the France 40 should be going up, then you can place a spread bet at a price of 3147.5. Your bet will be in your local currency that you use for your broker, say pounds sterling, despite the fact that the market is in France. Let’s say that you bet £10 per point.
If the price of the index went up to 3186.2 – 3188.2, you might decide to take your winnings. You can look at how much you won in this way –
The number of points that you gained is 3186.2 minus 3147.5.
So your points difference is 38.7.
Your bet was for £10 per point.
Simply multiply these two together, 38.7 multiplied by £10, to find out how much you have one.
Your total winnings are £387.
Of course, a lot of the time you will find that the index does not go in the direction that you wanted it to, and you will need to quit a losing bet before the amount becomes too much for your account to bear. Say that the index fell to 3130.2 – 3132.2 in the above example, and you decided to cut your losses and close the bet. Here is how you work out how much you lost –
The number of points that you lost is 3147.5 minus 3130.2.
Your points lost are 17.3.
Your bet was still for £10 per point.
Multiplying together, this means you lost £173.
As another example, say that you wanted to bet on the France 40 falling over time, and take out a futures based bet. Your spread betting broker quotes you a price of 3146 – 3148. You bet £13 per point that the index will fall below 3146.
Although your futures based spread bet is dated several months in the future, you can close it at any time. Perhaps the index will fall quickly to a price of 3086 – 3088, and you’ll decide it is time to take your winnings.
The number of points you have gained is 3146-3088, which is 58 points.
To see how much you have won you multiply this times your stake.
So the total you have won this time is £754.
The index could also have gone the other way, and increased in value and at some stage you would have to consider closing your losing spread bet before it became too expensive. Say it went up to 3159 – 3161. You close your losing bet at a price of 3161.
The number of points you lost is 3161-3146, a total of 15.
At your chosen stake of £13 per point, this amounts to £195.