June 29

Futures Market Guide For Trading- Information about all major Future contracts

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Last Updated on 29 June, 2022 by Samuelsson

Futures Market Guide For Trading. Are you looking for a financial market where you can hedge risk or speculate on price movement while easily using leverage to increase your exposure? The futures market is your best bet. It is traded as standardized contracts, and it has enough liquidity and volatility. Whether you are a merchant who wants physical delivery of the underlying assets or a speculator who just wants to benefit from price fluctuations, the futures market is for you.

Future markets and trading futures have a lot of benefits, such as low cost of execution and commissions, adequate liquidity, up to 10x leverage, enough volatility, ease of short-selling, better market efficiency, and a unique way to hedge against risk. Considering all these benefits, you may want to know what the futures market is.

The futures market, also known as a futures exchange, is a marketplace where people can buy or sell futures contracts and options on futures contracts. A Futures contract is a standardized contract to buy or sell specific quantities of an asset at a presently agreed price, to be delivered at a specified time in the future.

There are many things you may want to know about the futures market, so keep reading to find out more about markets, the history, and how futures work.

 

Interestingly, there are many different futures assets you can trade. These are some of them:

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Micro E-mini S&P 500 Index Futures (MES)

The Micro E-mini S&P 500 Index futures are a type of the S&P 500 futures that are worth 1/50 of the value of the standard S&P 500 futures contract or 1/10 of the value of the E-mini S&P 500 futures. This contract trades only on the Globex electronic trading platform.

You want to trade this contract because it offers capital efficiency. For instance, you only need $660 in maintenance margin when trading the Micro E-mini S&P 500 Index futures contract, unlike the $6,600 you would need when trading the E-mini S&P 500 Index futures. Moreover, with this contract, you can easily diversify your portfolio to other assets since the low margins afford you some spare cash to trade other assets. Since you don’t risk a lot trading the Micro E-mini S&P 500 Index futures, it’s easier to manage your emotions when trading.

5-Year T-Note Futures (ZF / FV)

The 5-T-Note futures is an interest rate futures contract in which the underlying asset is a Treasury note with the specified maturity period and interest rate. A qualifying T-Note for this contract is one whose original term to maturity is not more than five years and three months and the remaining term to maturity is not less than four years and two months as of the first day of the delivery month. The contract can be traded on the CME’s Globex electronic marketplace.

This contract allows you to speculate on the short-term direction of the Fed’s interest rates or even profit from arbitrage trading. You can also use the contract to hedge your exposure in the equity market, diversify your portfolio.

Micro E-mini Russell 2000 Index Futures (M2k)

The Micro E-mini Russell 2000 Index futures are a type of electronically traded Russell 2000 Index futures whose value is one-tenth of the E-mini Russell 2000 Index futures. The underlying asset is the Russell 2000 Index, and the contract is offered only on the CME’s Globex electronic trading platform.

With the Micro E-mini Russell 2000 Index futures, you can hedge your exposure in the U.S. stock market. The contract allows you to speculate on the direction of the index. Since it is less capital intensive, it makes it cheaper to build a diversified portfolio.

Micro E-mini Nasdaq 100 Futures

With the Nasdaq 100 index as their underlying asset, the Micro E-mini Nasdaq 100 futures is a type of electronically traded Nasdaq 100 futures whose value is one-tenth of the E-mini Nasdaq 100 futures. The contract is traded exclusively on the CME’s Globex electronic trading platform.

You can use the Micro E-mini Nasdaq 100 futures to hedge your exposure in technology stocks, as well as diversify your portfolio into the technology industry. If you just want to speculate, the contract offers you easy exposure to the Nasdaq futures market. With low margin and tick size, it’s easier to control your emotions.

E-mini Russell 2000 Index Futures (RTY)

Since its launch on the Chicago Mercantile Exchange Group’s marketplace, the E-mini Russell 2000 Index futures have gained tremendous popularity among traders. The contract is an electronically traded equity index futures that has the Russell 2000 Index as its underlying asset. It is worth a fraction of the standard contract.

You can use the Russell 2000 Index futures to gain exposure to the U.S. stock market without owning the individual company stocks. RTY is a diversified equity index derivative product, so it gives you an already diversified portfolio. Owing to its huge liquidity and adequate volatility, you can day trade the market as you like.

Euro Bund Futures

The Euro Bund futures are interest rate futures contracts in which the underlying asset is a notional long-term German federal government bond (Bundesanleihe).  They are the most actively traded interest rate futures in the European Economic Area. As a result, they are considered the benchmark by which other long-term euro-denominated government debt instruments are measured.

The contract is a haven asset you can use to hedge your portfolio during an equity market crisis. You can use it for arbitrage trading or speculate on the direction of interest rates in the Eurozone. It can be a great product for portfolio diversification.

Nasdaq 100 E-mini Futures

The E-mini Nasdaq 100 futures are electronically traded Nasdaq futures that were launched in the 1990s to provide small traders with an alternative to the standard contract. The value of the E-mini Nasdaq 100 futures is one-fifth of the standard contract, and the trading volume has since surpassed that of the standard contracts.

You can use the E-mini Nasdaq 100 futures to hedge your exposure in technology stock since it has a heavy concentration of tech stocks. And you can also use the contract to diversify your portfolio into tech stocks even without owning any of those stocks.

Micro E-mini Dow Jones Futures

Introduced on May 6, 2019, on the Chicago Mercantile Exchange Globex platform, the Micro E-mini Dow Jones futures are a type of electronically traded Dow Jones Index futures that are worth one-tenth of the E-mini Dow Jones futures. They were created to offer small traders exposure to the Dow Jones Index futures at a much lower cost than the already existing e-mini futures contracts.

The low margin needed to trade this contract makes it easy for you to trade other assets at the same time. You can use the Micro E-mini Dow Jones futures to hedge your exposure in U.S. stocks, especially for blue-chip stocks. Given the adequate liquidity and volatility, the contract is good for speculative trading.

Dow Jones E-mini Futures

The E-mini Dow Jones futures are a type of the Dow Jones Index futures that is only traded electronically on the Globex electronic trading platform. They are very popular among equity index futures traders as they offer investors exposure to the U.S. stock market without really owning the stocks. They are the most efficient and cost-effective way to gain market exposure to the most-capitalized U.S. stocks.

The Dow Jones E-mini futures have good volatility and liquidity, which make them for speculation. You can also use them to hedge your exposure in blue-chip U.S. stocks. The contracts offer you a great way to own an already diversified stock portfolio.

Euro F.X. Futures

The euro is the underlying asset of the Euro F.X. future, so the contract pricing of this currency futures is based on the expected exchange rate of the euro against the U.S. dollar in the future. In other words, the Euro F.X. futures is an exchange-traded contract that represents an agreement to receive or deliver the specified amount of euros on a future date at an already agreed exchange rate. The contract size is €125,000.

You can trade the Euro F.X. futures to make money from price movements or to hedge against interest rate risks. The contract is also good for arbitrage trading.

E-mini S&P Mid-Cap 400 Futures

The E-mini S&P Mid-Cap 400 futures is one of the prominent E-mini equity index futures on the Chicago Mercantile Exchange electronic marketplace. The underlying asset is the S&P Mid-Cap 400 Index. The contract size is $100 x S&P Mid-Cap 400, while the tick size is $10.

With the E-mini S&P Mid-Cap 400 futures, you can gain exposure to a basket of mid-size U.S. stocks without owning the stocks. You can use the contract to diversify the portfolio or hedge your equity investments. You can also speculate on price movements without any hassle.

E-mini S&P 500 Futures (ES)

The E-mini S&P 500 futures are a type of the S&P 500 futures that is traded only on the Globex electronic trading platform and is worth one-fifth of the value of the standard S&P 500 futures contract. The underlying asset for the S&P futures is the S&P Index, but the contract is cash-settled. The contract size is $50 x S&P 500 Index, while the tick size and the point value are $12.5 and $50 respectively.

The E-mini S&P 500 futures provides you with a way to diversify their stock portfolio, as well as hedge your exposure in the U.S. stock market. It is a very active market for speculation.

DAX Futures

Launched in the German futures market in 1990, the DAX futures are tradable contracts to receive or deliver the specified value of the DAX index on a future date at an already agreed price. The DAX futures contracts are standardized and traded on futures exchanges. The contract is mostly cash-settled.

The DAX Futures is known for adequate volatility and liquidity, which makes it a popular choice for speculation. It offers you exposure to the German stock market. You can also use it to hedge your equity market investments.

Japanese Yen Futures

The Japanese yen future is a financial derivative contract in which the underlying asset is the Japanese yen. The pricing of the Japanese yen futures is based on the expected exchange rate of the Japanese yen to the U.S. dollar on a future date. Like all other futures contracts, the Japanese yen futures are standardized and traded on the futures exchanges. This ensures that the trading activities are well regulated, unlike the spot forex market, where the broker can trade against the trader. One contract size is worth 12,500,000 Japanese yen, while the tick size is $6.25.

You may use the contract to hedge your exchange rate risk against the Japanese yen. The Japanese yen futures presents a liquid market for speculative trade.

Mexican Peso Futures

Backed by the Mexican peso as its underlying asset, the Mexican peso future is a tradable agreement to receive or deliver a specified amount of the currency on a future date at an already agreed exchange rate. The Mexican peso futures have pricing based on the Mexican peso’s expected future exchange rate to the U.S. dollar. The contract trades on the CME and its Globex electronic trading platform. One contract is worth 500,000 Mexican pesos, with the tick size being $5.

You can use the Mexican peso futures to hedge your exchange rate-exposed obligations in the Mexican market. The contract also provides you with the opportunity to speculate on the Mexican peso. In addition, if you love arbitrage trading, the contract is a great fit for it.

Nikkei 225 Futures

The Nikkei 225 futures is an equity index futures in which the underlying asset is the Nikkei 225 Index. It is a tradable contract to receive or deliver the specified value of the underlying index on a future date at an already agreed price, and the contract can be traded on the CME, JPX, and SGX.

You can use the contract to diversify your portfolios, as well as hedge your exposure in Japanese stocks. It also provides you with an opportunity to speculate on the Japanese stock market. There is also the opportunity for arbitrage trading.

Swiss Franc Futures

The Swiss franc future is a financial derivative product in which the underlying asset is the Swiss franc. It has a pricing system that is based on the expected exchange rate of the Swiss franc to the U.S. dollar in the future. The Swiss franc futures are standardized contracts that trade on the futures exchanges, and as such, it is highly regulated.

Being a futures contract, the Swiss franc futures is a leveraged instrument. So, you only need to deposit a portion of the contract’s total worth to be able to trade the contract. The Swiss franc is considered a safe-haven currency, so you use it to hedge your wealth during periods of global financial market crises. The market is also liquid and volatile enough for speculative trading.

Trading Strategy in Swiss Franc Futures

Australian Dollar Futures

This is a currency futures contract in which the underlying asset is the Australian dollar, and the pricing reflects the expected exchange rate of the Australian dollar to the U.S. dollar in the future. It is an exchange-traded currency contract that represents an agreement to receive or deliver a specified amount of Australian dollars on a future date at an already agreed exchange rate. It is offered on the CME and its Globex electronic trading platforms. One contract is worth 100,000 Australian dollars, with a tick size of $10. The last trading day is the second business day immediately before the third Wednesday of the contract month, which can be March, June, September, or December.

The Australian dollar futures offer you a way to hedge your exchange rate-exposed obligations in the Australian market. It also provides you with the opportunity to speculate on the Australian dollar and conduct arbitrage trading with ease.

Bitcoin Futures

Bitcoin futures are a type of futures where the underlying asset is Bitcoin. The prices of Bitcoin futures depend on spot Bitcoin prices and reflect the expected future value of Bitcoin. It is offered on the CFE, CME, and ICE. Bitcoin futures are standardized and traded on regulated futures exchanges, so the price discovery process is transparent, unlike the OTC-traded spot Bitcoin market.

If you’re a Bitcoin miner, Bitcoin futures offer you a way to hedge against price volatility. The contract also offers an opportunity for speculation and arbitrage trading.

Canadian Dollar Futures (CD)

The Canadian dollar futures is a tradable contract to receive or deliver the specified amount of Canadian dollars on a future date at an already agreed exchange rate. So, the underlying asset is the Canadian dollar, and the pricing is based on the expected future exchange rate of the Canadian dollar to the U.S. dollar. It trades on the CME and its Globex electronic trading platforms. One contract is worth 100,000 Canadian dollars.

If you are exposed to Canadian dollar exchange rate risks, you may use the Canadian dollar futures as a risk management tool. You can also use it for speculative trading or arbitrage trading.

U.S. Dollar Index Futures (DX)

The U.S. Dollar Index futures is a standardized futures contract whose value reflects the expected value of the U.S. Dollar Index in the future. The contract represents an agreement to make or take delivery of the currencies that make up the index — in their respective percentage weights — on a specified future date and at a predetermined rate. One contract is worth $1000 X Index value.

The U.S. Dollar Index futures is a great instrument for speculative trading and arbitrage trading. You can also use it to hedge your exchange rate risks in the component currencies.

British Pound Futures

The British pound futures is a futures contract whose underlying asset is the British pound, with its pricing based on the expected future exchange rate of the British pound to the U.S. dollar. It is a contract to receive or deliver the specified amount of GBP on a future date at an already agreed exchange rate. One contract is worth 62,500 British Pounds, and the tick size is $6.25.

The British pound futures is highly liquid and has adequate volatility, so it’s good for speculative trading. If you are an American resident invested in the British market, you can use it to hedge exchange rate risks. Similarly, if you’re a British resident invested in the US market, you can use it to hedge exchange rate risks too.

Crude Oil Futures (CL)

A crude oil futures contract is a standardized contract that trades on commodity exchanges. The value reflects the anticipated price of crude oil in the future. A crude oil futures contract is an agreement to make or take delivery of a specified quantity of crude oil on a specified future date at a predetermined price. CL is the most popular and most actively traded energy contract on the commodity market. Little wonder they are the global benchmark for the energy market. The contract is highly liquid and, at the same time, has the kind of volatility that attracts both traders and investors.

You can trade the CL contract just to benefit from price movements, but you can also use the contract to diversify your portfolio or hedge your exposure in certain energy stocks.

Eurodollar Futures

Eurodollar futures contracts are futures contracts whose values derive from the interest-yielding U.S. dollar deposits held outside of the U.S. So, the price of this contract moves in response to the interest rate offered on U.S. dollar deposits held in foreign banks, specifically London banks. The contract is a LIBOR-based derivative, so it reflects the London Interbank Offered Rate for a 3-month $1 million offshore deposit. The Eurodollar futures are actively traded on the CME and ICE electronic platforms.

You can use the Eurodollars futures for arbitrage trading, hedging, speculative trading, or portfolio diversification.

Natural Gas Futures (N.G.)

This is one of the most actively traded energy futures, after crude oil, but it is also known for its high price volatility. Natural gas futures are offered on many commodity exchanges, such as the ICE, NYMEX, and TOCOM. One contract is worth 10,000 million British thermal units (mmBtu), and the tick size is $10.

The high volatility in the Natural gas futures market makes it suitable for speculative trading, especially day trading. But you can also use it to diversify your portfolio and hedge inflation since commodities often increase in value when inflation hits hard on the economy. If you are a stakeholder in the energy sector, you can use it to manage price risks.

Heating Oil Futures

Heating oil futures are futures contracts traded on commodity exchanges whose underlying assets are heating oil, which is used for heating residential and office buildings. The contracts are traded on the Intercontinental Exchange (ICE) and the New York Mercantile Exchange (NYMEX) and can be traded even after the regular trading hours through their electronic trading platforms. Heating oil futures show significant seasonal variations — the prices of heating oil futures go up during the winter months and decline in the summer months.

You can use heating oil futures for speculative trading, diversifying your portfolio, or simply hedging against inflation. If you are a producer of heating oil or run a business that needs a huge supply of heating oil, you can also use heating oil futures to hedge price risks.

Orange Juice O.J. Futures

This is a futures contract whose underlying asset is orange juice, which can be frozen concentrated orange juice (FCOJ), reconstituted liquid juice, and not-from-concentrate (NFC) juice. While there are other forms of the commodity, frozen concentrated orange juice futures are the industry benchmark, and the contract is traded on the ICE. Owing to its nutritional importance and diverse uses, the orange juice futures contract is very popular among commodity traders worldwide.

If you are an orange farmer, a producer of FCOJ, or a maker of orange juices, you can use the orange juice futures market to secure a reasonable price for your products. Moreover, you can trade the contract to diversify your portfolio, hedge against inflation, or simply speculate on price movements.

Silver Futures

This is a futures contract whose underlying asset is the physical silver metal. One contract is worth 5,000 troy ounces. Silver futures started trading on commodity exchanges as early as 1933. You can trade the contract on the CME Group, LME, MCX, and TOCOM. The contract is settled by physical delivery.

You can trade silver futures to diversify their portfolios, hedge inflation, or speculate on price movements. If you’re a silver producer and use silver in manufacturing processes, you can come to the silver futures market to hedge price fluctuations.

Gold Futures

Gold futures are derivative financial instruments whose value depends on the overall value of gold. Trading in gold futures started on the Commodity Exchanges Inc. in 1974. The underlying commodity in the gold futures is the physical gold bars or ingots, and it is delivered at the expiration of the contract. One contract is worth 100 troy ounces of gold.

You can trade gold futures to hedge inflation, diversify your portfolio, or speculate on gold price movements. If you’re involved in gold production or your business uses gold, you can use gold futures to hedge future price changes.

Lead Futures

This is a contract to receive or deliver a specified quantity of lead on a future date at an already agreed price. Lead futures contracts are offered on the London Metal Exchange (LME) and the Commodity Exchange Inc. (COMEX), which is a member of the Chicago Mercantile Exchange (CME) Group. The contract is quite popular, given the importance of lead in battery production and making protective shields in a radioactive environment. A contract of lead futures is worth 25 metric tons of lead.

There are many reasons to trade lead futures. You can trade it to speculate on price movements, hedge against inflation, or diversify your portfolio. If you are a producer or have a company that uses the product, you can use lead futures to protect your business from price fluctuations.

RBOB Gasoline Futures

This is a futures contract whose underlying asset is the Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline, also known as petrol. Following the ban on MTBE-containing gasoline, the RBOB gasoline futures contract has become very popular among futures traders. A gasoline futures contract (RB) is equivalent to 42,000 gallons or 1,000 barrels of gasoline, and the price quotation is in U.S. dollars and cents per gallon. The minimum price fluctuation is 1/100 of a cent per gallon or $4.2 per contract. The RBOB gasoline futures can be traded on various commodity exchanges, including the ICE, CME, and TOCOM.

You can trade the RBOB gasoline futures contract for speculation or to diversify your portfolio. If you are a stakeholder in the industry, you can trade the contract to hedge price fluctuations.

30-Year Treasury Bond Futures

This is a futures contract in which the contract holder is obligated to buy or sell a qualified Treasury bond on a specified date at a presently agreed price. Introduced on the Chicago Board of Trade (CBOT) in 1977, the 30-year Treasury bond futures are the most traded Treasury bond contracts on the futures market. They serve as an important benchmark by which other long-term securities are measured. The 30-year Treasury bond is actively traded on the CBOT and CME Globex electronic platforms.

You can use the 30-year Treasury bond futures to speculate on the direction of interest rates or hedge your portfolios. The contract also presents an opportunity for arbitrage trading.

10-Year Treasury Bond Futures

The 10-year U.S. Treasury note futures contract (TY) is a futures product that has the 10-year Treasury note as its underlying asset. A Treasury note (T-note) is a U.S. debt instrument with a fixed interest rate and matures between one and ten years. It is traded on the Chicago Board of Trade (CBOT), which is a member of the Chicago Mercantile Exchange (CME) Group.

You can use this contract to hedge your investment against a medium-term economic crisis. You can also trade this contract to speculate on the direction of interest rates and profit from the fluctuations.

VIX Futures

This is a futures contract whose underlying asset is the Cboe’s Volatility Index (VIX). The VIX is a real-time market estimate of the expected volatility in the stock market and is often considered the first barometer of equity market volatility. The VIX futures contract shows the market’s estimate of the value of the VIX Index on various expiration dates in the future. It trades on the Cboe Futures Exchange (CFE)’s all-electronic marketplace, but it can be quite volatile. One contract size is $1000 times the current value of the VIX, and the contract is cash settled.

You can trade VIX Futures to speculate on the anticipated volatility in the equity market. You may also use it to hedge your exposure in the equity market or simply trade it as a way to diversify your portfolio.

Palladium Futures

This is a futures contract on palladium. Trading palladium futures is the easiest and cheapest way to access the palladium market. One palladium futures contract (P.A.) is equivalent to 100 troy ounces of the commodity, and the price quotation is in U.S. dollars and cents per troy ounce. The minimum price fluctuation is 10 cents per troy ounce or $10.00 per contract. Palladium futures are traded on various commodity exchanges, including the TOCOM and the CME Group