CAC 40: what is it and how do you trade or invest in 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'Oreal, 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 most 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 or invest in 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.

If you have a long-term outlook, you can also get exposure to the index by investing in individual stocks or ETFs. You can also follow the index as France represents a large portion of the European economy.

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 products
• 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

How to trade or invest in the CAC 40

1. Choose whether you want to trade or invest
2. Open a live account or practise on a demo
3. Take steps to manage your risk
4. Place your deal and monitor your position

With us, you’ll choose between trading the CAC 40 price with our France 40 offering or investing in France 40-linked ETFs and stocks.

Trade the CAC 40 price directly

Our derivative products enable you to trade the CAC 40 price directly via our France 40 offering, You can also go long or short on CAC 40-linked stocks and ETFs to gain exposure. You’ll use spread bets or CFDs to take a position, and your profit or loss will depend on the outcome of your prediction.

With spread bets, you’ll trade the France 40 by betting a certain amount per point movement in the underlying’s price. Alternatively, you can use CFDs to buy or sell contracts to exchange the price difference of the France 40 between the opening and closing position.

Using both derivatives, 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.

Trade or invest in CAC 40 ETFs

Exchange traded funds (ETFs) give traders and investors access to a wide range of markets and assets through a single point of entry – an ETF share. With this option, you’ll invest in CAC 40-linked ETFs using our share dealing offering to take outright ownership.

You can also trade CAC 40-linked ETFs or fund shares using our derivative products to speculate on price movements. When trading, 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.

Trade or invest in individual CAC 40 stocks

You can also get exposure by trading or investing in 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 or simply buy a stake in the company. Some of the companies that you’ll find include L'Oreal, 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 and investors alike 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’Oreal, 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 spread betting or CFD trading account
• Alternatively, you can use our share dealing account to invest in the France 40 index or CAC 40-linked stocks and ETFs to take ownership of the stock

¹ Focus Economy, 2022
² Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
³ Trade in your share dealing account three or more times in the previous month to qualify for our best commission rates. Please note published rates are valid up to £25,000 notional value. See our full list of share dealing charges and fees.