INDICES

Unlike Forex or commodities, trading indices can appear to be quite an intangible concept. After all, in Forex we invest in currencies, in commodity trading we invest in commodities such as gold, but what exactly are we investing in when it comes to index trading?  An index is basically a figure that reflects the health of a market or an economy.  So how can we actually translate figures into profit?

The answer lies in index mutual funds (the index constituents). When you invest in an index you are in fact investing in a fund that mirrors the movement of the index. What index options trading enables you to do is to invest in a very large segment of a market, or even an entire market itself. For example, in stock index trading, you have the option of investing in the NASDAQ, the Dow Jones, or the S&P 500, among other indices, all of which reflect different broad market properties. By investing for instance in the Dow Jones Industrial Average, you would be investing in a significant portion of the industrial market.