CAC 40^®: what is it and how do you trade on it?

What is the CAC 40^®?

The CAC 40 is a stock market index that tracks the 40 largest shares listed on the Paris Stock Exchange. The selection of stocks are based on market capitalisation and the index is commonly used as an indicator of France’s market performance.

As the benchmark index for the French market, the CAC 40^® is one of the biggest European stock markets, hence it’s one of the most important national indices of the pan-European stock exchange group, Euronext.

The CAC 40^® initially started with a base level of 1000 on 31 December 1987. Like most stock markets around the world, the dot-com bubble around the early 2000s saw the index hit an all-time high of 6922.33 points.

CAC stands for ‘Cotation Assistée en Continu’ , loosely translated in English to ‘continuous assisted trading’. The name is derived from its value being updated every 15 seconds from Monday to Friday between 9am and 5.30pm.

What companies are in the CAC 40® index?

Some of the big names on the CAC 40® index include LVMH, L’Oréal, Hermès, TotalEnergies and Sanofi. These are five of the 40 companies that are reviewed every quarter by an independent committee, with the ranking often changing based on the current value of their turnover from the previous 12 months, and the overall market capitalisation.

While most of the companies listed on the CAC 40® consist of France-based corporations, the index comprises of the highest number of multinational stocks in comparison to other European markets. This means that you’ll find approximately 45% of the listed stocks owned by foreign investors.

Why trade on the CAC 40^® index?

The CAC 40^® index is popular among traders because it’s one of the most liquid stock market indices in the world. This means that the market fluctuates very quickly, presenting you with the opportunity to buy and sell the index in the short term.

You can also get exposure to the index by speculating on individual stocks or exchange traded funds (ETFs). Most traders follow the index because France represents a large portion of the European economy, making it a useful indicator for speculating on performance of the entire region.

France has one fifth of the Euro area gross domestic product (GDP), which represents around the fifth largest economy in the world.¹ You can take a bullish or bearish position depending on news updates about the economy or quarterly results of individual CAC 40^® stocks.

Some of the reasons why traders get exposure to the CAC 40^® include:

• The Paris Stock Exchange has a fixed opening and closing time. This enables you to identify trends and patterns that develop and get exposure. We offer extended hours to enable you to trade before and after the fixed opening and closing time using our derivative product
• The CAC 40^® is the easiest way to take a position on the French market. Traders can also use fundamental analysis when monitoring news updates, monetary policy, macro and micropolitics to understand price movements before making a prediction
• You can distribute risk by trading the CAC 40^® instead of a single company stock

Check out the live price of the France 40 that mirrors the CAC 40^®.

How to trade on the CAC 40^®

1. Open a live account or practice on a demo
2. Take steps to manage your risk
3. Place your deal and monitor your position

With us, you’ll trade on the CAC 40® price with our France 40 offering using a CFD account. When trading via CFDs, you won’t take ownership of the underlying asset outright, but you’ll be speculating on the France 40 price rising or falling. You can also use CFDs to trade CAC 40-linked stocks and ETFs with us.

1. Trade the CAC 40^® price directly

You’ll trade the CAC 40^® price directly via our France 40 offering. Using our derivative product, you’ll buy or sell CFD contracts to exchange the price difference of the France 40 between the opening and closing position.

To get exposure, you’ll go long if you believe that the market price will rise or go short if you think that it’ll fall. Your profit or loss will depend on the outcome of your prediction.

You can trade via the spot price, which is closest to the underlying price with low spreads, but includes overnight fees. Alternatively, you can trade via futures contracts, which have wider spreads but no overnight fees.

2. Trade on CAC 40^® ETFs

ETFs give traders access to a wide range of markets and assets through a single point of entry – an ETF share. With this option, you’ll trade on CAC 40^®-linked ETFs using our CFD trading account to take a position.

You can also trade CAC 40^®-linked fund shares using our derivative product to speculate on price movements. When using CFDs, it’s better to do so on the index directly to trade the real price, which has lower spreads, higher liquidity, and longer market hours.

3. Trade on individual CAC 40^® stocks

You can also get exposure by trading on individual stocks that make up the CAC 40^® index. These are the top 40 France-based companies, whereby you can speculate on their price rising and falling. Some of the companies that you’ll find include L’Oréal, Renault, Michelin and many others.

CAC 40^® summed up

• The CAC 40^® is a stock market index that tracks the 40 largest France-based shares listed on the Paris Stock Exchange
• Traders often choose to get exposure to the CAC 40^® because it’s one of the most liquid markets around
• You’ll find global brands like L’Oréal, LVMH, Renault and many others on the CAC 40^® index, with all shares listed being ranked by market capitalisation
• You can speculate on the individual stocks that make up the top 40 France-based companies or trade the CAC 40^® directly via our France 40 offering using our CFD trading account

Footnotes
1 Focus Economy, 2022
CAC 40® is registered trademark(s) of Euronext N.V. or its subsidiaries. Euronext N.V. or its subsidiaries holds all (intellectual) proprietary rights with respect to the Index. Euronext N.V. or its subsidiaries do not sponsor, endorse or have any other involvement in the issue and offering of the product. Euronext N.V. and its subsidiaries disclaim any liability for any inaccuracy in the data on which the Index is based, for any mistakes, errors, or omissions in the calculation and/or dissemination of the Index, or for the manner in which it is applied in connection with the issue and offering thereof.