Futures trading prices

[kaveman]

Futures are traded in Contracts which represents ? something
If trading the SPI and current price is 4270 does that mean the price of a contract is $4,270. I read that change in trade return is $25 per point.

AS you can see am totally utterly confused andd have not found any information at various sites that tells me in black and white how you actually trade futures.
You buy contracts - what are these, etc

perhaps some nice soul can enlighten me on some real details

TIA

 

[DTM]

Hi Kaveman

A contract costs $2,200 so every point that moves in your favour equates to $25. So if you are long 10 contracts of the SPI index at whatever you bought, and it moves up 10 points it means that profits are $25 X 10 (points) X 10 (contracts) = $2,500.

I think thats how it goes.

 

[Battman64]

That is correct DTM
The margin does fluctuate somewhat.
4300 x $25 = $107,500
One contract

 

[wayneL]

Hi Kaveman

A contract costs $2,200 so every point that moves in your favour equates to $25. So if you are long 10 contracts of the SPI index at whatever you bought, and it moves up 10 points it means that profits are $25 X 10 (points) X 10 (contracts) = $2,500.

I think thats how it goes.

Here ya go kavey. Contract specs for all SFE products

http://www.sfe.com.au/content/sfe/trading/con_specs.pdf

 

[kaveman]

thanks, I think
so you pay $2200 for 1 contract, regardless of the value of the SPI and for every 1 point move you gain/lose $25, again regardless of the SPI value

lost me on the margin, but guess that means % move against the SPI value

Wayne, I read that pdf and that is the reason I asked the question. It does not give the specifics of what a contract represents, or how much it is.

To incorporate your expected direction are there call and put contracts?

 

[Battman64]

Kaveman,
You are required to have the margin available before buying/selling contracts.
ie $10,000 You could buy/sell four contracts comfortably.

 

[wayneL]

OK,

The value of 1 contract is the index value (say 4300) times $25.

So the value of 1 contract, when the index is 4300, is $107,500. This means that when you buy one september contract, you are agreeing to buy a basket of shares represented by the ASX S&P200 for $107,500. (if held till expiry)

However because of the impracticality of delivering 200 parcels of shares of varying size it is "cash settled". In other words just work out the profit or loss and settle with a credit or debit to your account.

Short selling the contract is the exact opposite. You are agreeing to deliver a parcel of shares for $107,500 (if held til expiry). But cash settled of course.

You do not actually pay for these contracts as it's just a contract. You do however put up a performance bond to cover you broker etc. This is what margin is. Margin can vary according to market volatility and can increase markedly. This is something traders with small accounts must be careful of. Margin when I was trading the SPI was $3,750 has been much much higher during 9/11 and suchlike.

You do not have to hold the contract till expiry, you can liquidate it at any time, hence futures trading

Hopr that answers your question.

Cheers

 

[kaveman]

Kaveman,
You are required to have the margin available before buying/selling contracts.
ie $10,000 You could buy/sell four contracts comfortably.

Margin when I was trading the SPI was $3,750 has been much much higher during 9/11 and suchlike.

This gets more confusing for me, sorry

Perhaps an example
SPI value 4000
Contract price $2200

So margin would be something that you don't know without your broker in the here and now, but could be 3,000-4,000 per contract
So $10k account would only fetch 2 or 3 contracts as your broker would hold the additional margin requirement (2x$4k or 3x$3k) out of which the contract price of 2200 / contract is taken to pay your way.

again my apologies as I am confused

 

[Battman64]

From "Trading The SPI" (Brent's book) linked earlier in one of my threads
"At time of writing,it only requires $1,750 to trade one SPI contract,.."

If you work on approx $2500 per contract you will not be far out.

I teach people to only trade one contract with tight stoplosses,
until you can honestly say to yourself that you are in the 10% club.
The ones that can consistantly take money out of this market.
It is NOT easy.

 

[mit]

Kaveman,

I think you are still confused. The value of the contract is $25 * value of the SPI (Just over $100k). The various other amounts mentioned are the margin requirements which can vary between brokers. Yes, you would only be able to buy 2-3 contracts per $10k in your account. But I think for money management I have heard that you should have at least $10k per contract. The current ATR is around 40 pips which is about $1k per contract or 10% of $10k. With 3 contracts this would be $3k. Very tight stops if you only want to risk 2% of you stake per trade.

MIT

 

[Bloveld]

Hello
You dont buy or sell contracts. You enter a contract to deliver or to take delivery of the commodity at a given price. Probably easier to start thinking of tangible commodities first.
I might enter a contract to buy 1000 barrels of crude oil at $57 per barrel. To enter this contract someone must take the other side of trade, ie sell 1000 barrels of crude oil at $57. If crude goes to $60 I may enter a contract to deliver the oil at $60. At the end of trading my long and short contracts are balanced out and I would be flat ie no contracts.
Margin is held by the broker in case the trade moves against me.
Simple.
Steve

 

[kaveman]

thanks for all the replies
as I don't want to buy the S&P200 index guess it would be best to stear clear of this as don't have a spare $100k and I certainly don't want a tanker full of crude oil or soy beans delivered to my front door. I will stick with what I know is best

 

[wayneL]

Hello
You dont buy or sell contracts. You enter a contract to deliver or to take delivery of the commodity at a given price.

That is true, strictly speaking. But as far as traders are concerned:

Entering a contract to take delivery is called a buy. Closing out that contract is called a sell.

Entering a contract to deliver is called a short sell. Closing out that contract is called a cover.

But I think it is an important point you make in order to understand what a futures contract is.

Graham,

The last thing 99% of futures traders want is to take delivery of 3 semi-trailers full of frozen pork bellies. Traders will close out contracts (or roll out to a later contract) before this becomes a possibility.

There is a lot more to consider with some futures contracts and it is a definate no-go zone if you don't fully understand.

There are books on futures available at most larger libraries. I reckon even if you never trade them, it is good for a trader to have an understanding of futures.

Cheers

 

[DTM]

thanks for all the replies
as I don't want to buy the S&P200 index guess it would be best to stear clear of this as don't have a spare $100k and I certainly don't want a tanker full of crude oil or soy beans delivered to my front door. I will stick with what I know is best

Hi Kaveman

The $2,200 I was quoting you was from a broker when I was inquiring about the SPI. Basically, that $2,200 was the amount required to control 1 contract at the time. Highly leaveraged, and maybe not for the faint hearted.

 

[wayneL]

This brochure from the CME explains some of the american equivalents of the SPI....and does rather a better job at it than the SFE site.

http://www.cme.com/files/emini.pdf

Cheers

 

[Grang]

Hi all,

This is my first post and it feels kinda freaky replying to a post from nearly 5 years ago, but it seems to be the most logical place to add a question about futures (rather than commencing a new post).

My question is, when buying a June 2010 futures contract (SPI 200) and the price is 4,850 (wow, not too much has changed in 5 years, huh) does this mean I am entering into a contract with a seller to cash settle the difference between the price now (4,850) and the price of the S&P/ASX 200 at settlement day (day after the 3rd Thursday in June - the 18th I think)?

I realise I can trade the contract on the market prior to settlement day.

E.g. If at 18 June the market is 5,000 then, ignoring brokerage, the seller of the contract would need to pay me (150 x $25) $3,250?

Cheers
Grang

 

[vish.shah]

Hi Grang,

You are right.

1. When you buy 1 SPI Contract, you enter into a contract with the seller of that contract to settle on pre-determined date. e.g. June SPI (APM0) you agree to settle for cash (whatever the price is at fixed time. I think its 12 pm).

2. If prices for SPI goes up, you PROFIT the difference of point x $25.

3. If prices for SPI Goes down, you LOSE the difference of point x $25.

4. E.g. If at 18 June the market is 5,000 then, ignoring brokerage, the seller of the contract would need to pay me (150 x $25) $3,250? - This is absolutely correct.

Regs,

 

[sunbeam]

Who would be a good broker for trading the SPI and what what would be a reasonable brokerage for a round trip if say trading up to 3 contracts 2-3 times a week.

Thanks

 

[nomore4s]

Who would be a good broker for trading the SPI and what what would be a reasonable brokerage for a round trip if say trading up to 3 contracts 2-3 times a week.

Thanks

Interactive Brokers - click on one of the ads on ASF

Brokerage per contract is $5 each way.

You can trade a bastardized version of the SPI through CFD providers but there are a few pitfalls with trading through the Bucket shops, they also tend to be a bit more expensive.

 

[sunbeam]

Thanks Nomore - your byline is one of my favourite quotes and I use it all the time.

I was aware of IB and also would not use CFDs as the spread is effectively several points of slippage. I would prefer an online service where I could also if I need to place an order over the phone when not at my PC.

When I last traded I used Lquay and they charged me $22 a round trip but they are not around anymore. Someone similar is what i am looking for


Thanks