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I built a trading model to predict the FTSE index. However, apparently one cannot trade the FTSE directly, but only different underlying products.

My model trains on the FTSE index, however tradeable FTSE futures are 20% different in daily direction.

Are there any ways to trade the FTSE index directly and not some derivative product that has different daily price movements?

I saw that apparently there are different FTSEs to choose from Also, interactive brokers shows a list of several FTSE indices to trade.

There is:

  • FTSE 100 Index Z
  • FTSE Eurotop 100 Index Q
  • FTSE 100 TR Index GBP TUKXG

I don't understand what it means and which one represents the real FTSE 100 index to train my model on.

Short explanation would be helpful

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  • $\begingroup$ You could trade it directly via swap with your prime broker. $\endgroup$
    – amdopt
    Commented Jul 22, 2017 at 19:23
  • $\begingroup$ @amdopt ok, how could this be done in interactive brokers and what does swap mean? $\endgroup$
    – user670186
    Commented Jul 23, 2017 at 10:55
  • $\begingroup$ Have you considered spread betting? Most of the providers have major indices in their offer. The advantage of spread betting is that it's tax-free for UK residents and bets can be placed on both sides of the market (buy/sell). $\endgroup$
    – mac13k
    Commented Jul 24, 2017 at 11:14

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I would have a look at ETFs tracking the FTSE 100. There will still be a small tracking error due the the way ETFs work.

At a starting point have a look at this list: FTSE 100 Index ETFs - ETFdb.com

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I agreed with chjortlund. Tracking ETFs are probably your best bet with a marginal tracking error depending on rebalancing etc.

However, the question is why would you have a strategy on something that is not directly tradable? i.e. strategy that works on the VIX but not its futures would be pointless.

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  • $\begingroup$ i was not aware that one cannot make bets on an index directly, @amdopt mentioned that it is possible with swaps. When I track an ETF then I would have to train my model on that ETF, but this data is probably not publicly available. $\endgroup$
    – user670186
    Commented Jul 24, 2017 at 10:53

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