Buying and Selling

Historically, futures trading was conducted on the trading floor through traders' verbal outcry. Most futures transactions are completed electronically. During the transaction, investors enter buying and selling orders through the futures company's computer system, and the exchange's matching system completes the transaction.

When buying and selling futures contracts, both parties need to pay a small amount of money to the clearing house as a performance guarantee. This money is called a margin. The first purchase of a contract is called a long position, and the first sale of a contract is called a short position. The contract on hand is then subject to daily settlement, which is marked to market on a daily basis.

After establishing a buying and selling position (the term is called opening a position), you do not need to hold it until expiration. You can make a reverse transaction at any time before the expiration of the stock index futures contract to offset the original position. This transaction It's called closing a position. For example, you sell 10 stock index futures contracts on the first day and buy back 10 contracts on the second day. So the first transaction is to open a short position of 10 lots of stock index futures, and the second transaction is to close a short position of 10 lots of stock index futures. The next day, I bought another 20 stock index futures contracts, and now I opened a long position of 20 stock index futures contracts. Then sell 10 of them, which is called closing the long position of 10 stock index futures, leaving 10 long positions of stock index futures. Contracts on hand that are not closed after the end of the day's trading are called open positions. In this example, the position after trading on the first day is short 10 lots of stock index futures, and the position after trading on the second day is long 10 lots of stock index futures.

Settlement

The settlement of stock index futures can be roughly divided into two levels: first, the settlement department of the clearing house or exchange settles with members, and then the members settle with investors. Regardless of the level, three things need to be done:

(1) Transaction processing and position management, which means registering which transactions were made and what the positions were after each transaction.

(2) Financial management means that the profit and loss of the position must be settled every day, the profit part will be returned to the margin, and the loss part will be called for margin.

(3) Risk management, assessing the risks of settlement objects and calculating margins.

Delivery

When the stock index futures contract expires, like other futures, delivery is required. However, general commodity futures, treasury bond futures, foreign exchange futures, etc. use physical delivery, while stock index futures and short-term interest rate futures use cash delivery. The so-called cash delivery means that there is no need to deliver a basket of stock index constituent stocks, but the spot index on the expiration date or the next day is used as the final settlement price, and the position is closed through profit and loss settlement with the final settlement price.

Handling fees

Stock index futures handling fees can be understood as commissions on stocks. Stock index futures handling fees refer to the fees paid by futures traders after a futures transaction is completed, based on a certain proportion of the total contract value.

Each futures brokerage company is a member of the exchange (financial exchanges are not). A fixed part of the handling fee for participating in futures transactions is handed over to the exchange, and the other part is collected by the futures company, which collects it. The standard is to add a part to the futures exchange for its own operations.

The handling fees will also vary depending on the size of the customer's funds. For customers with large amounts of funds or even millions of customers, futures companies will reduce the handling fees accordingly.

Trading Rules

The first point is to look at the market and make stock index decisions. Since the advent of stock index futures, what have stocks become? Stocks have become spot goods. Stocks are spot goods and stock indexes are futures. When we trade commodities, the copper on the market is spot, and what I trade here is futures. Soybeans are spot, and what is traded here are futures. With the stock index, stocks are our spot. Futures have two main functions. The first is to avoid risks, and the second is to discover prices. Risk avoidance mainly involves hedging, and there are many ways. The main research on transactions in real offer is. Let's take a look. Futures guide spot, and spot drives futures. To simply infer this sentence, the stock index guides the market, and the market drives the stock index. When we are trading, State Street Investments reminds us that the stock index has risen, and the overall direction is consistent. There is no doubt that it will move in the same direction. It means that the stock index guides the market in one minute or two minutes. You When you can't see its direction, just look at the stock index. The stock index will tell you how the market is going.