CAC 40 Chart
The CAC 40 is the primary benchmark index in France. The index is made up of 40 of the largest companies, primarily trading on the Euronext Paris stock exchange. The French stock market is an important one as it is one of the top 10 largest in the world. The CAC 40 is made up of a large number of companies which operate and earn profits internationally. Similar to other major global indices, it is weighted by market capitalization, making the largest companies the most important to the performance of the French index. The CAC 40 has been in existence since 1987, where it started at a value of 1000.
How to trade the CAC 40
The CAC 40 trades on Euronext. The exchange code is “FCE”. The contract value is €10 multiplied by the index price (i.e. €10 x 4,700 = €47,000).
The primary expiration months are March, June, September, and December.
Exchange Traded Fund (ETF)
The CAC 40 can also be traded via the LYXOR UCITS ETF CAC 40, under the ticker symbol – CAC FP, which closely tracks the movements of the French index. It is an effective way to trade the CAC due to its low expense ratio and availability to investors of all size. It is denominated in Euros and trades on Euronext.
Options are available for both futures and the ETF. It is suggested that one familiarize themselves with how options work before trading them. This is one of the least capital intensive ways to trade the CAC 40, as options premiums can be as low as a few pounds per contract. Traders can use options as a hedge or to speculate on the direction of the index, both up and down.
Contract for Difference (CFD)
This instrument was designed with the small trader or investor in mind. CFDs are constructed with futures contracts, but made into smaller contracts which require significantly less margin than futures contracts. Just like futures, these trade nearly 24-hours a day, 5-days a week. Most traders in the world outside of the United States have access to a broker who offers CFDs. These can be traded in both directions, long and short.
What impacts the CAC 40?
Global macro-economic conditions weigh significantly on this index as it has large international exposure. A majority of the companies in the CAC 40 have exposure to the global marketplace and thus significantly impacted by trends in the global economy.
Central Bank activity impacts the French economy and stock market as it does in other developed countries. Changes in monetary policy by the European Central Bank (i.e. interest rate changes, quantitative easing) will have an impact on investor sentiment and thus market performance.
The CAC 40 is made up of a relatively small number of stocks similarly to the Dow Jones Industrial Average or DAX 30. Due to the limited number of stocks in the index, each one has more impact on price fluctuations than say the more broad-based US S&P 500 index. The market capitalization of the top 10 components adds up to approximately half of the index (August 2016).