The easiest way to make money from a fall in the FTSE 100 index is by adopting a position on an inverse ETF (exchange-traded fund) or on a stock that you expect will lose value. This is a safer option than betting on individual shares, which could buck the trend of falling prices due to many different factors. How to short the FTSE.
How to Short the FTSE: Strategies for Profiting in a Bear Market
To do this, you’ll need to open an account with a broker that offers ETFs and stocks. You’ll also need to deposit funds into your trading account. Once you’ve done this, you can start searching for a suitable ETF or FTSE stock that you expect will fall in price.
Alternatively, you can trade FTSE 100 futures contracts. These are agreements to buy or sell an asset at a specific price on a certain date. However, unlike other types of futures contracts, there is no underlying physical asset to be exchanged, meaning the value of FTSE 100 futures is purely speculative.
For example, if you shorted Rio Tinto shares and the company fell by 200p per share, you would receive PS4000 from selling the shares (again, this doesn’t take into account any borrowing costs that might apply). You can then return the shares to your broker and buy them back for PS3800. This will give you a profit of PS200, assuming that the FTSE 100 index does fall by the amount that you’ve predicted (before any brokerage fees or dividend costs are owed). There are five popular ways to trade the FTSE: CFDs, spread betting, FTSE futures, options and ETFs. Whichever you choose, it’s important to understand how each method works and the risks involved before making any trades.…