ASX SPI 200 Futures allow you to trade the S&P/ASX 200 Index in a single transaction, allowing you to gain exposure to Australia’s top 200 firms without having to buy or sell shares in each of the index’s 200 companies.
In futures, what does SPI stand for?
The SPI 200 Futures contract, based on the S&P/ASX 200 Index, is Australia’s benchmark equity index futures product. It has all of the advantages of regular stock index derivatives. In terms of traded volume, the SPI 200 is among Asia’s top ten stock index contracts.
Futures and options are available on a quarterly and serial basis. Up to six quarter months ahead in March, June, September, and December, and up to two non-financial quarter months ahead in serial months.
How do futures on the ASX work?
Unlike stocks, where you typically buy first and sell later, futures allow you to sell first and then buy back later. This allows you to take advantage of both decreasing and growing prices. Short futures refers to the act of selling a futures contract. The sale of a futures contract binds the seller to sell a commodity or asset at a price agreed today at a future date, or to settle the contract by paying or receiving the difference in cash between the purchase price and the final settlement price.
The term “long futures” refers to the purchase of a futures contract. The purchase of a futures contract binds the buyer to purchase a commodity or asset at a price agreed upon today on a future date, or to settle the contract by paying or receiving the difference in cash between the purchase price and the final settlement price.
What is the SPI 200 futures contract’s point value?
A futures contract is an agreement in which one party (the “buyer”) promises to acquire a specific asset or instrument at a pre-determined price from another party (the “seller”) at some point in the future.
Futures contracts are useful in financial markets because they allow investors to speculate on price movements for specific financial instruments (such as an equity index) with a relatively small initial investment ( “initial margin”), and to simply close out their position by making a counter-trade.
Futures contracts are accessible in numerous equities, commodity, and fixed income markets across the world. Futures contracts are called derivatives because their value is derived from other instruments (such as the underlying index).
The Australian S&P/ASX 200 Index is covered by futures contracts, as one might assume.
An ASX SPI 200 futures contract, in this scenario, grants the owner the right to collect $25 in cash for each index point the index is trading at at a future point in time (expiration date).
One SPI futures contract would be worth $125,000 if the S&P/ASX 200 Index was trading at 5000 points at expiry.
As should be obvious, the current price of a futures contract is determined by market predictions for where the stock market will be when the contract expires.
In general, if the S&P/ASX 200 Index climbs by 1%, the price of near-dated SPI futures contracts (those set to expire in less than a month) tends to rise by 1% as well.
Furthermore, to purchase one futures contract, the “The current “initial margin” is $8500, implying that an investor only needs to invest 6.5 percent of the entire contract exposure received.
What can you learn from stock index futures?
- Stock index futures, such as the S&P 500 E-mini Futures (ES), reflect expectations for a stock index’s price at a later date, based on dividends and interest rates.
- Index futures are two-party agreements that are considered a zero-sum game because when one party wins, the other loses, and there is no net wealth transfer.
- While the stock market in the United States is most busy from 9:30 a.m. to 4:00 p.m. ET, stock index futures trade almost continuously.
- Outside of normal market hours, the rise or fall in index futures is frequently utilized as a predictor of whether the stock market will open higher or lower the next day.
- Arbitrageurs use buy and sell programs in the stock market to profit from price differences between index futures and fair value.
Is it possible to make money trading futures?
Futures are traded on margin, with investors paying as little as ten percent of the contract’s value to possess it and control the right to sell it until it expires. Profits are magnified by margins, but they also allow you to gamble money you can’t afford to lose. It’s important to remember that trading on margin entails a unique set of risks. Choose contracts that expire after the period in which you estimate prices to peak. If you buy a March futures contract in January but don’t expect the commodity to achieve its peak value until April, the contract is worthless. Even if April futures aren’t available, a May contract is preferable because you can sell it before it expires while still waiting for the commodity’s price to climb.
Who can trade futures?
Futures trading allows investors to speculate or hedge on the price movement of a securities, commodity, or financial instrument. Traders do this by purchasing a futures contract, which is a legally binding agreement to buy or sell an asset at a predetermined price at a future date. Grain growers could sell their wheat for forward delivery when futures were invented in the mid-nineteenth century.
What are the ways to benefit from futures contracts?
The dollar value of a one-tick move is multiplied by the number of ticks the futures contract has moved since you purchased it to calculate profit and loss on a trade.
Is trading futures in Australia illegal?
Australia has outlawed the trading of cryptocurrency futures. The Australian government has barred the largest crypto exchange from offering their crypto futures and options in their market due to pressure.
What are my options for trading the ASX SPI 200?
Trading in ASX SPI 200TM Futures takes place ‘on-market’ using the ASX Trade24 electronic platform (previously known as SYCOM). Through the Block Trade Facility and the Exchange for Physical Facility, ASX SPI 200TM Futures can be traded ‘off-market.’