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Korean KOSPI 200 Futures – Trading Strategies Analysis | Symbols and Contract Specifications

Last Updated on 10 February, 2024 by Rejaul Karim

The KOSPI 200 Index futures market track the KOSPI 200 Index market and were introduced in 1996.

Futures Contract (KOSPI) Specifications

Symbol:  KOSPI

Point Size: KRW 250,000

Minimum Price Fluctuation: KRW 12,500

Trading Hours:

Single Price Auction: 08:00 ~ 09:00 and 15:35 ~ 15:45
09:00 ~15:45 (Mon-Fri)
09:00 ~15:20 (Last trading day)

Expiration Months: March, June, September, and December

The last trading day is the second thursday of the contract month

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Advantages of KOSPI200 Futures

Kospi 200 futures have the same benefits as other futures contracts. They are good

As with most types of futures, the Kospi 200 Futures contract useful for traders who want to hedge against market movements. Futures are also good for those who wish to adjust their portfolio allocation through leverage. Here are two more advantages of the Kospi 200 futures Market:

Low Costs – KOSPI200 Futures offer very low costs relative to the exposure in relation to their market exposure

How to trade the Korean KOSPI 200 Futures successfully?

1. Research the Market: Before trading the Korean KOSPI 200 Futures, it is important to understand the underlying factors that will affect the futures contract. Research the index, its components, and the economic, political, and social factors that might influence its performance.

2. Set Trading Goals: Establish your trading goals and develop a strategy to achieve them. Consider factors such as risk tolerance, trading time frames, and capital allocation when creating your plan.

3. Analyze the Market: Develop a technical and fundamental analysis of the market. Utilize charting software to identify possible entry and exit points. Analyze economic indicators, market news, and corporate events that could influence the KOSPI 200 Futures.

4. Monitor Market Conditions: Monitor the market to identify potential trading opportunities. Utilize news and data sources to stay up-to-date on market developments.

5. Execute Trades: Once an opportunity is identified, execute the trade. Utilize limit orders, stop-loss orders, and other risk management tools to protect your capital.

6. Manage Your Risk: Use risk management tools to mitigate losses and protect your capital. Consider factors such as stop-loss orders, position sizing, and hedging when managing your risk.

7. Review Performance: Regularly review your performance and adjust your trading plan as necessary. Evaluate your strategies to identify strengths and weaknesses and adjust as needed.

Kospi 200
Kospi 200

The Kospi 200 Index Market

Kospi 200 is a market index that consists of the 200 largest companies of the KOSPI index, which was in introduced in 1983 with a starting value of 100, counting from 1980. The KOSPI200 index makes up over 90% of the KOSPI index, which makes the two indexes very alike.

KRX 100 Market Index

The KRX 100 index was introduced in an attempt to replace the KOSPI 200 for futures contracts. However, the attempt has not proven successful so far, and KOSPI 200 remains the most widespread index of the two.

KRX 100 is made up of the 100 largest stocks listed on the Korea Exchange.

Reasons to Trade Korean Kospi 200 Futures

 Leverage

Futures give traders the option to profit even from small movements, through leverage.

Low Costs

With futures, you pay very little in relation to the market exposure you get through leverage.

You May Go Short

With futures contracts, you can sell short and profit from downward movements in the market.

You can read more about the benefits of trading futures in our post on the topic.

Trading Strategies

Every market has its own special characteristics, but there are some traits that can be observed in many markets. One such logic that is prevalent among market indexes, is mean reversion.

Mean reversion is the tendency of a market to revert to its mean, once it has made exaggerated moves in one direction. So, of the market has moved excessively to the downside, we may soon expect it to turn around. The mean reverting tendency of index markets is best used to go long by catching a falling market, due to the long term rising trend of the equity markets.

In our collection of edges and strategies, we have gathered edges for a wide range of markets! Have a look!

1. Momentum Trading: Momentum trading involves taking advantage of a security’s momentum by buying and selling it after a sustained and significant price movement. This strategy is typically used for short-term trading opportunities. Traders will look for strong trending moves either up or down in the Kospi 200 futures, and then place trades in the same direction. This strategy works best when the markets are trending in one direction, allowing traders to ride the trend.

2. Breakout Trading: Breakout trading involves seeking to capitalize on sudden and large moves in price, either up or down. Traders look for a price to break out of a range or a support and resistance level, and then place trades in the direction of the breakout. This strategy works best when the markets are volatile, as it allows traders to capitalize on sudden moves in price.

3. Contrarian Investing: Contrarian investing involves taking the opposite position of the majority of traders. This means that if the majority of traders are buying the Kospi 200 futures, a contrarian investor would go against the crowd and sell the futures. This strategy works best when the markets are heavily trending in one direction, as this allows contrarian investors to capitalize on any sudden reversals in the market.

4. Range Trading: Range trading involves taking advantage of a trading range, which is when a security trades within a certain price range for a period of time. Traders look for a security to trade within a certain range and then place trades when the price touches the boundaries of the range. This strategy works best when the markets are relatively stable, allowing traders to capitalize on the range-bound price action.

Seasonality of Kospi 200 futures

The Korean KOSPI 200 Futures is a futures contract traded on the Korea Exchange (KRX) that tracks the performance of the benchmark KOSPI 200 index. The KOSPI 200 Index tracks the performance of the 200 largest and most liquid stocks listed on the exchange.

KOSPI 200 Futures have seasonal tendencies that tend to follow a yearly cycle. Generally speaking, the KOSPI 200 has tended to show higher returns in January and February and lower returns in April and May. From June through August, the KOSPI 200 tends to be relatively flat and show little price movement. During this period, traders tend to be more focused on the markets in the US and Europe.

In the fall, the KOSPI 200 tends to show higher returns from September through November. This is due to the fact that investors tend to be more optimistic about the Korean economy during this period, as the country is heading into the fourth quarter and the holiday shopping season.

Overall, the KOSPI 200 Futures tend to show higher returns in the winter months, but then tend to be relatively flat during the summer months. During the fall, the KOSPI 200 tends to show higher returns due to increased optimism about the Korean economy.

Korean KOSPI 200 Futures are futures contracts that track the KOSPI 200 Index, a stock market index comprised of 200 of the largest companies on the Korea Exchange. The seasonal tendencies of the KOSPI 200 Futures vary by month and tend to be impacted by macroeconomic and geopolitical events.

January: KOSPI 200 Futures typically experiences a positive performance in January, as investors are usually optimistic about the upcoming year.

February: KOSPI 200 Futures tend to be volatile in February, as the Lunar New Year holiday affects trading activity.

March: KOSPI 200 Futures usually rally in March, as investors benefit from the end of the Lunar New Year holiday.

April: KOSPI 200 Futures tend to be volatile in April, as the month is a popular time for companies to release earnings reports.

May: KOSPI 200 Futures are typically range-bound in May, as investors remain uncertain about future economic conditions.

June: KOSPI 200 Futures tend to be volatile in June, as investors adjust their portfolios ahead of the summer months.

July: KOSPI 200 Futures usually experience a positive performance in July, as the summer months bring increased trading activity.

August: KOSPI 200 Futures tend to be range-bound in August, as market activity slows due to vacation season.

September: KOSPI 200 Futures usually rally in September, as investors adjust their portfolios ahead of the fourth quarter.

October: KOSPI 200 Futures tend to be volatile in October, as investors adjust to the changing economic conditions.

November: KOSPI 200 Futures usually experience a positive performance in November, as the month is typically a strong period for equity markets.

December: KOSPI 200 Futures tend to be range-bound in December, as investors typically move to the sidelines ahead of the holiday season.

Some interesting statistics about Korean KOSPI 200 Futures

1. Average Daily Volume: The average daily volume of KOSPI 200 Futures is over 5 million contracts.
2. Open Interest: The open interest of KOSPI 200 Futures is over 8 million contracts.
3. Highest Volume Day: The highest volume day for KOSPI 200 Futures was on April 5, 2019 with over 11 million contracts traded.
4. Most Volatile Day: The most volatile day for KOSPI 200 Futures was on June 6, 2018 with an intraday range of over 200 points.
5. Average Spread: The average spread for KOSPI 200 Futures is 0.2%.
6. Average Daily Range: The average daily range for KOSPI 200 Futures is 4.3%.
7. Average Daily Price Change: The average daily price change for KOSPI 200 Futures is 0.2%.
8. Average Volatility: The average volatility for KOSPI 200 Futures is 2.1%.
9. Average Daily Turnover: The average daily turnover for KOSPI 200 Futures is US$2.5 billion.
10. Average Daily Notional Value: The average daily notional value for KOSPI 200 Futures is US$16 billion.

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Where to Find Price Data

The price graph of the Kospi 200 futures market can be viewed here.

If you want to get data into your trading platform you will have to sign up for an external data feed. E-signal offers data for the Kospi 200 futures market

Where To Trade Kospi 200 Futures

Not all American brokers offer Asian or even European markets.

However, Interactive Brokers (IB) does, and Hang Seng futures can be traded through them. IB is known for its low commissions and is a reliable broker in the trading industry.

Here is our archive with articles about other tradeable futures markets.

 

FAQ

What is the KOSPI 200 Index Futures Market?

Answer: The KOSPI 200 Index futures market tracks the KOSPI 200 Index and was introduced in 1996. It allows investors to trade futures contracts based on the performance of the 200 largest companies listed on the Korea Exchange.

What are the Advantages of KOSPI 200 Futures?

KOSPI 200 futures offer benefits such as low costs relative to market exposure, hedging against market movements, and portfolio adjustment through leverage.

How Can I Successfully Trade Korean KOSPI 200 Futures?

Successful trading involves research, setting goals, analyzing the market, monitoring conditions, executing trades, managing risk, and regularly reviewing performance.

What is the KOSPI 200 Index, and How Does It Relate to KOSPI?

The KOSPI 200 Index consists of the 200 largest companies of the KOSPI index, introduced in 1983. The KOSPI 200 represents over 90% of the KOSPI index, making them closely related.

What is the KRX 100 Market Index, and How Does It Compare to KOSPI 200?

The KRX 100 index, introduced to replace KOSPI 200 for futures contracts, has not succeeded. KOSPI 200 remains the more widespread index, while KRX 100 comprises the 100 largest stocks on the Korea Exchange.

What Are Some Trading Strategies for KOSPI 200 Futures?

Trading strategies include momentum trading, breakout trading, contrarian investing, and range trading. Mean reversion is observed, and strategies can be tailored to market characteristics.

What are Some Interesting Statistics About Korean KOSPI 200 Futures?

Notable statistics include average daily volume, open interest, highest volume day, most volatile day, average spread, average daily range, average daily price change, average volatility, average daily turnover, and average daily notional value.

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