CAC 40 Index Trading

Posted by OliverPearson 0

cac40

The CAC 40 index or Cotation Assistée en Continu is the basic index of the French stock market. The index is an average capitalization-weighted measure of the top 40 companies’ shares traded on the Euronext Paris.

The index is available for investments during business days from 9:00 a.m. to 5:30 p.m. (CET).

This financial instrument is composed of the shares of commercial banks, hotels, airlines, automotive groups, textile companies etc.

As well as other stock market indices, the CAC 40 index (which is also referred to as France 40) is affected by political and economic events not only in France, but around the globe. This is because the companies included in the index run a business and hence have revenue in many parts of the world.

Besides, over 45% of the companies’ shares included in the CAC 40 are owned by foreign investors.

The most significant foreign investors are the German investors owning 21% of the shares.

Also, about 63% of the companies included in САС 40 do business outside France.

CAC 40 index is composed of the following companies

  • Accor (hotels)
  • Air France-KLM (airlines)
  • Air Liquide  (chemicals)
  • Alcatel-Lucent (telecommunications)
  • Alstom (industrial machine manufacturing)
  • ArcelorMittal (steel)
  • AXA (insurance)
  • BNP Paribas (banks)
  • Bouygues (heavy machinery)
  • Capgemini (outsourcing)
  • Carrefour (food retail)
  • Crédit Agricole (banks)
  • Dexia (banks)
  • EADS (aerospace industry)
  • EDF (electric power industry)
  • Essilor (medicines)
  • France Télécom (landline operators)
  • GDF Suez (gas distribution)
  • Groupe Danone (food products)
  • L’Oréal (consumer goods)
  • Lafarge (construction materials)
  • Lagardère (publishing house)
  • LVMH (clothes and accessories)
  • Michelin (tires)
  • Pernod Ricard (distillation units and wine merchants)
  • PSA Peugeot Citroën (cars)
  • PPR (sellers of a wide range of products)
  • Renault (cars)
  • Saint-Gobain (construction materials)
  • Sanofi-Aventis (pharmaceuticals)
  • Schneider Electric (electrical parts and equipment)
  • Société Générale (banks)
  • STMicroelectronics (semiconductors)
  • Suez Environnement (water)
  • Total (oil and gas industry)
  • Unibail-Rodamco (real estate investment trusts)
  • Vallourec (industrial machinery)
  • Veolia Environnement (water supply)
  • Vinci (heavy machinery)
  • Vivendi (broadcasting and entertainment)

Analysis of CAC 40 Index

Along with the stock index of the largest economies of the European Union (like FTSE 100 or  DAX), CAC40 index is rather informative indicator of both the French stock market and EU economy.

If to compare the CAC 40 and other EU leading stock exchange indices, you can’t fail to notice their correlation due to deep integration of the French and EU economy.

Though the index is comparatively young, it is rather strong and influential as it mirrors the economic situation in France.

40 companies included the index have a significant impact on the French economy.

It’s interesting that not all of them are based in France; almost half of them are outside the country.  France is the second largest economy in Europe behind Germany; therefore CAC 40 index has a significant impact on the European economy and is affected by it at the same time.

The list of the companies included in the index is revised quarterly.

The decision whether the company will be included or excluded is made based on its capitalization. At first, the top 100 companies are chosen. Then 40 companies are selected to enter the CAC 40.

The economic situation in France, political changes, and outside factors have a considerable impact on the companies’ shares quotes and hence the stock exchange index.

 

  • Positive factors making the index grow include an improvement in business conditions in the country, political stability, increase in export, sales, revenue and hence shares prices.
  • Negative factors are wrong external policy that can result in loss of foreign economic relations, sales markets etc. The worldwide instability also results in decrease of the figures.

 

CAC-40If you trade binary options and want to make a profit on this instrument, you need to consider an ocean of the world’s political and economic events. You have to constantly check the data from Europe, France and its partners, the economic and political satiation in which can affect the figures someway.

 

 

You need to analyze regularly trends in some companies’ shares included in the index. Also, you have to keep track ofthe companies that are included and excluded from the index on a quarterly basis as it can affect the chart.  

Behavior of this financial instrument enables a trader to make a pretty good profit. However, the trader has to do a thorough fundamental analysis.

To pinpoint a future price direction of the index, you have to keep track of the economic calendar and, in particular, news on the Eurozone. Also, you can use forecasts.

World turmoil, decrease in demand, purchasing power in the countries to which goods are exported are the negative factors. You need to consider them trading the CAC 40 index.

How to Make a Profit on CAC 40

To make a profit on CAC 40, I advise you to trade binary options.

To yield on binary options, you just need to forecast the price direction during a certain period, for instance, whether the price will rise or fall during next 10 minutes.

So, I browse AnyOption’s website, the top binary options broker. This is a reliable time-proved broker that set limits on binary options risks.

I select an underlying asset, that is, the CAC 40, and set the expiry to 6:00 p.m. Now, it’s 5:41 p.m. This means that I invest for a period of 19 minutes. I forecast that the price will fall a little during this period.  I select the amount of investment and click PUT (Down) as I expect the price to go down:

1
 

After 20 minutes, I browse the broker’s website and check the results of the trade.

2

I’ve made a 80% profit or $172 in 19 minutes!

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