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| Information About Futures (part 4) |
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| Daytrader-Generation “No Gambling but True Working Tools to Achieve Profit” "Day-Trading, Business of the Future !" |
| About Type of Futures and Expiration |
| Trader : Herman Bogaerts -- Tradersname : Freedom -- E-Mail : Admin@Daytrader-generation.com -- Skype Address : Freedom1608 |
| Back to "Futures Info" : click here Back to "Frequently AskedQuestions" : click here |
1) Different Type of Futures
You have Index Futures, Currency Futures, Commodity and Weather Futures.
Let us go more in detail about Index Futures !
Index Futures
Index futures are futures markets where the underlying commodity is a stock index, such as the Dow Jones, the Cac40 or the Dax.
Stock indexes cannot be traded directly, so futures based upon stock indexes are the primary way of trading stock indexes. Index futures are
essentially the same as all other futures markets (fe. currency & commodity futures), and are traded in exactly the same way.
Some of the most popular futures markets are those that are based upon stock indexes, including the following US, European, and Asian markets.
You have Index Futures, Currency Futures, Commodity and Weather Futures.
Let us go more in detail about Index Futures !
Index Futures
Index futures are futures markets where the underlying commodity is a stock index, such as the Dow Jones, the Cac40 or the Dax.
Stock indexes cannot be traded directly, so futures based upon stock indexes are the primary way of trading stock indexes. Index futures are
essentially the same as all other futures markets (fe. currency & commodity futures), and are traded in exactly the same way.
Some of the most popular futures markets are those that are based upon stock indexes, including the following US, European, and Asian markets.
If you trade any of the above futures markets, make sure that you update your trading and charting software to use the new contracts before
the current contracts expire. The current contracts will remain the most actively traded contracts until Thursday, but on Friday the new contracts
will become the most actively traded. You can update your trading and charting software at any time, but the recommended time is before the
markets open on Friday.
the current contracts expire. The current contracts will remain the most actively traded contracts until Thursday, but on Friday the new contracts
will become the most actively traded. You can update your trading and charting software at any time, but the recommended time is before the
markets open on Friday.
US Index Futures
YM - The mini Dow Jones index future of ECBOT (Chicago Board of Trade)
NQ - The mini Nasdaq index future of ECBOT (Chicago Board of Trade)
ES - The mini S & P 500 index future of Globex (Chicago Mercantile Exchange)
ER2 - The mini Russell 2000 index future of Globex (Chicago Mercantile Exchange
YM - The mini Dow Jones index future of ECBOT (Chicago Board of Trade)
NQ - The mini Nasdaq index future of ECBOT (Chicago Board of Trade)
ES - The mini S & P 500 index future of Globex (Chicago Mercantile Exchange)
ER2 - The mini Russell 2000 index future of Globex (Chicago Mercantile Exchange
European Index Futures
DAX - The DAX index future of the DTB (Deutsche Boerse)
CAC40 - The CAC40 index future of MONEP (Euronext Paris)
SMI - The SMI index future of SOFFEX (Eurex Switzerland)
Z - The FTSE100 index future of LIFFE (London International Futures Exchange)
DAX - The DAX index future of the DTB (Deutsche Boerse)
CAC40 - The CAC40 index future of MONEP (Euronext Paris)
SMI - The SMI index future of SOFFEX (Eurex Switzerland)
Z - The FTSE100 index future of LIFFE (London International Futures Exchange)
Asian Index Futures
HSI - The Hang Seng index future of the HKFE (Hong Kong Exchanges and Clearing)
SPI - The Australian Stock Exchange 200 index future of SNFE (Sydney Futures Exchange)
HSI - The Hang Seng index future of the HKFE (Hong Kong Exchanges and Clearing)
SPI - The Australian Stock Exchange 200 index future of SNFE (Sydney Futures Exchange)
2) Expiration and How to manage it !
Expiry is the time/the day when the final prices of the future is determined and where the previous one ceases to excist.
For many equity index and interest rate futures contracts, this happens on the third Friday of certain trading month (except when it falls on a
holiday, in which case it is on Thursday / see also Note (*1)). On this day the t+1 futures contract becomes the t futures contract.
For example :for most CME and CBOT contracts, at the expiry on December, the March futures become the nearest contract. This is an exciting
time for arbitrage desks, as they will try to make rapid gains during the short period (normally 30 minutes) where the final prices are averaged
from. At this moment the futures and the underlying assets are extremely liquid and any mis-pricing between an index and an underlying asset is
quickly traded by arbitrageurs. At this moment also, the increase in volume is caused by traders rolling over positions to the next contract or, in
the case of equity index futures, purchasing underlying components of those indexes to hedge against current index positions. On the expiry date,
a European equity arbitrage trading desk in London or Frankfurt will see positions expire in as many as eight major markets almost every half an
hour.
Note (*1)
The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock
options, this date is the Saturday immediately following the third Friday of the expiration month; brokerage firms may set an earlier deadline for
notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.
The last day on which an option holder may exercise an option. This date is stated in the contract at the time the option is written.
Expiry is the time/the day when the final prices of the future is determined and where the previous one ceases to excist.
For many equity index and interest rate futures contracts, this happens on the third Friday of certain trading month (except when it falls on a
holiday, in which case it is on Thursday / see also Note (*1)). On this day the t+1 futures contract becomes the t futures contract.
For example :for most CME and CBOT contracts, at the expiry on December, the March futures become the nearest contract. This is an exciting
time for arbitrage desks, as they will try to make rapid gains during the short period (normally 30 minutes) where the final prices are averaged
from. At this moment the futures and the underlying assets are extremely liquid and any mis-pricing between an index and an underlying asset is
quickly traded by arbitrageurs. At this moment also, the increase in volume is caused by traders rolling over positions to the next contract or, in
the case of equity index futures, purchasing underlying components of those indexes to hedge against current index positions. On the expiry date,
a European equity arbitrage trading desk in London or Frankfurt will see positions expire in as many as eight major markets almost every half an
hour.
Note (*1)
The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock
options, this date is the Saturday immediately following the third Friday of the expiration month; brokerage firms may set an earlier deadline for
notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.
The last day on which an option holder may exercise an option. This date is stated in the contract at the time the option is written.
Note (*2)
All futures markets switch to new contracts at regular intervals, ranging from monthly to every three months. Many popular futures contracts expire
at the end of this week, including the following stock index and currency futures. For example :
All futures markets switch to new contracts at regular intervals, ranging from monthly to every three months. Many popular futures contracts expire
at the end of this week, including the following stock index and currency futures. For example :
==) DAX (Switch from March to June)
==) CAC40 (Switch from March to April)
==) SMI (Switch from March to June)
==) CAC40 (Switch from March to April)
==) SMI (Switch from March to June)
==) YM (Switch from March to June)
==) ER2 (Switch from March to June)
==) ES (Switch from March to June)
==) ER2 (Switch from March to June)
==) ES (Switch from March to June)
==) EUR (Switch from March to June)
==) GBP (Switch from March to June)
==) CHF (Switch from March to June)
==) GBP (Switch from March to June)
==) CHF (Switch from March to June)
For a list of all USA expiration dates : click here
3) " Triple and Quadruple Withching Day (= Freaky Friday)"
Triple Witching happens on the third Friday of every third month (March, June, September, and December), and is the simultaneous expiration
(or rollover) of various futures and options contracts. These contracts include some of the index and currency futures, the index and currency
options, and the stock options. With the addition of some single stock futures contracts, some day traders are now calling this event Quadruple
Witching. Triple or Quadruple Witching can cause erratic behaviour in the affected markets, both on and around the expiration days.
Some day traders take no notice of these times, some recommend caution, and others recommend not trading at all. Which reaction you choose
will depend upon your trading style (scalping, trend trading, etc.), and your trading plan.
Note that not all futures and options contracts expire on only these days, so even though the triple witching days are the most talked about, they
are not the only expiration days to be aware of.
Triple Witching happens on the third Friday of every third month (March, June, September, and December), and is the simultaneous expiration
(or rollover) of various futures and options contracts. These contracts include some of the index and currency futures, the index and currency
options, and the stock options. With the addition of some single stock futures contracts, some day traders are now calling this event Quadruple
Witching. Triple or Quadruple Witching can cause erratic behaviour in the affected markets, both on and around the expiration days.
Some day traders take no notice of these times, some recommend caution, and others recommend not trading at all. Which reaction you choose
will depend upon your trading style (scalping, trend trading, etc.), and your trading plan.
Note that not all futures and options contracts expire on only these days, so even though the triple witching days are the most talked about, they
are not the only expiration days to be aware of.
| Source : * About.com * Wikipedia.com |