Using FTSE 100 ETFs to Trade an Index Signal

Summary

The document addresses a mismatch between a model trained on the FTSE index and the price movements of tradeable futures. The suggested instrument is an exchange-traded fund that tracks the FTSE 100. An ETF provides a way to trade exposure tied to the index, while the response cautions that its returns may differ slightly because of tracking error and rebalancing. The question also asks which of several index labels represents the relevant benchmark, but the answers do not explain those labels.

The replies offer a starting point rather than a comparison of specific funds or a detailed instrument-selection method. They do not quantify tracking error, discuss ETF liquidity or costs, or establish whether an ETF will match the model’s training data closely enough. One answer also raises the broader point that a strategy should be evaluated on an instrument that can actually be traded. The practical implication is to align model inputs and execution instruments, then account for the remaining difference between index and ETF prices.

Key ideas

• FTSE 100 tracking ETFs are suggested as a tradeable proxy for the index.
• ETF returns can differ from the index because of tracking error and rebalancing.
• The document does not clarify the different FTSE index labels shown by the broker.
• A model should be assessed against the tradeable instrument on which it will be executed.

Tags

# How to trade the FTSE index long and short


# How to trade the FTSE index long and short












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

## Answer by chjortlund (score 1)

https://quant.stackexchange.com/a/35250

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

## Answer by james (score 0)

https://quant.stackexchange.com/a/35251

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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