DOW Index question

[JoeJoe28]

If I buy the DOW index via the IG CFD platform, does the money outlayed for the margin go directly into buying all the 30 component companies that make up the DOW? I would think not? This being the case then the DOW index volume contracts do not contribute to actual component company changes in price.

If anyone can help, thanks.

 

 

[Caseynotes]

4 hours ago, JoeJoe28 said:

If I buy the DOW index via the IG CFD platform, does the money outlayed for the margin go directly into buying all the 30 component companies that make up the DOW? I would think not? This being the case then the DOW index volume contracts do not contribute to actual component company changes in price.

If anyone can help, thanks.

 

 

Hi, the margin requirement is just the amount you need to hold in your account to cover your leveraged trade.

The Index is a separate, stand alone market so you are are buying or selling contracts based on the index itself rather than the individual constituents. 

[JoeJoe28]

Not a worry, thanks for the help...

[JoeJoe28]

I suppose the same is the case for a DOW component company bought through IG Markets CFD trading platform, that is, the margin out-layed never actually makes it to the component company hence moving its price. That would make sense seeing as no dividend is given. If anyone can confirm this that would great, thanks!

[BigDeal]

All CFDs are derivatives - you do not own or influence the price of the underlying market you are buying / selling. However dividends do apply to CFDs, either shares or indices, which you either earn or pay depending on whether you are long / short at the time the dividend is due

[Kodiak]

Sometimes they hedge in the "real" market

 

 

[JoeJoe28]

Thanks guys...

I suppose there might be rules and regulations causing IG to have to purchase the actual stock(s) and the reason a dividend is payed? Or IG is not forced at all, rather they protect themselves by purchasing the actual stock(s) in the event of un-favourable market activity? Or all of the above? Anyhow, questions answered, thanks again.