Futures
Example#1. Buy NASDAQ-100 Index with Futures (long position)
The Futures contract named "E-mini NASDAQ-100, Dec 2009" is listed on Chicago Futures Exchange and has NASDAQ-100 Index as the underlying asset. This product has the following characteristics:
Contract size: 20 Indices
Contract currency: USD
Required margin: 3,500 USD
Maintenance margin: 2,800 USD
Contract expiration: 18-12-2009
Opening position
On May 3rd, the NASDAQ-100 is trading at 1,425 points. The Futures contract "E-mini NASDAQ-100, Dec 2009" for the same date and time is trading at 1,400 (bid) / 1,450 (ask).
An investor expects NASDAQ 100 Index to rise; thus, decides to open a long position on May 3rd by buying the Futures contract at 1,450 USD (ask price). The trade notional (market exposure) is 29,000 USD (20 indices x 1,450 USD).
Closing position
The investor decides to keep his position until contract expiration. As expected, the NASDAQ-100 index went up and on December 18th is trading at 1,800 points. The "E-mini NASDAQ-100, Dec 2009" Futures contract for the same date and time is trading at 1.775 (bid) / 1,825 (ask). You decide to close your position at 1,775 (bid price).
Trade summary
Example #2. Buy Gold with Futures (long position)
A Futures contract named "NY mini Gold, Aug 2009" is listed in the Chicago Futures Exchange, with Gold as the underlying asset. This contract presents the following characteristics:
Contract size: 33.2 ounce of gold
Contract currency: USD
Required margin:1,800 USD
Maintenance margin: 1,333 USD
Contract expiration: 28-07-2009
Opening position
On May 3rd, an ounce of gold is trading at 903 USD (US Dollars) in the Spot market. The contract "NY mini Gold, Aug 2009" for the same date and time is trading at 896 (bid) / 910 (ask) USD per ounce of gold.
An investor expects a rise in the price of Gold. Therefore he/she decides to open a long position on that date by buying three contracts at 910 USD per ounce of gold each. Therefore, his exposure totals 90,636 (3 contracts x 33.2 ounces x USD 910) USD.
Closing position
The investor decides to keep his position until its expiration on July 28th of 2009. As expected, Gold spot price went up and is trading at USD 940 per ounce. The contract "NY mini Gold, Aug 2009" for the same date and time is trading at 937 (bid) / 944 (ask) USD per ounce. At the expiration date, the Futures contract is closed and profits are credited to investor, in this example 2,689 USD (US Dollars).
Trade summary
Example #3. Sell Oil with Futures (short position)
The Futures contract, named " Nymex miNY Light Sweet Crude Oil, Jun 2009", is listed in the Chicago Futures Exchange. This contract has the following characteristics:
Contract size: 500 barrels
Contract currency: USD
Required margin: 3,544 USD
Maintenance margin: 2,625 USD
Contract expiration: 19-06-2009
Opening position
On May 3rd, the spot price of a barrel of oil is at 51 USD. The Futures contract "Nymex miNY Light Sweet Crude Oil, Jun 2009" for the same date and time is trading at 50 (bid) / 52 (ask) USD.
Because an investor expects the price of oil to drop, he/she decides to open a short position by selling two Futures contracts at 50 USD per barrel. Therefore his exposure is 50,000 USD (2 contracts x 500 barrels x 50 USD per barrel). The margin required to open a position is 7,088 (3,544 USD x 2 contracts) USD.
Closing position
The investor decides to keep his position until its expiration on June 18th of 2009. As predicted, the price of crude has fallen to 39.5 USD per barrel. The contract "Nymex miNY Light Sweet Crude Oil, Jun 2009" is trading at 39 (bid) / 40 (ask) USD for the same date and time, so the investor buys two contracts in order to close his position.
Trade summary
Example #4. Buy Bonds with Futures (long position)
Futures contract on Treasury Bonds (US Bond Federal Reserve) named "30-year U.S. T-Bond, Sep 2009" is traded on GLOBEX Exchange in New York and has the following characteristics:
Contract size: 1000 points
Contract currency: USD
Required margin: 4,860 USD
Maintenance margin: 3,600 USD
Contract expiration: 21-09-2009
Opening position
The Futures contract with "30-year U.S. T-Bond, Sep 2009" with T-Bond as the underlying asset that expires on May 11th of 2009 is trading at 121.16 (bid) / 121.18 (ask). The Futures prices are affected by increases or decreases of the Bond price that are particularly affected by monetary policy (i.e. interest rates) set by Federal Reserve.
An investor expects Bond prices to rise. Therefore he/she decides to open a long position on May 11th and buy 3 contracts for 121.18 USD each. His exposure is 364,000 USD (3 contracts x 1000 x 121.18 USD).
Closing position
The investor decides to hold his position until maturity. At expiration date, as predicted, the price of Bonds has risen and the Futures "30-year U.S. T-Bond, Sep 2009" contract is trading at 122.18 (bid) / 122.20 (ask) USD.
Trade summary
Example #5. Sell Interest Rates with Futures (short position)
The Futures contract named "Euribor 3 Months, June 09" with Euribor-3 Months as the underlying asset, is traded on London Futures Exchange and has the following characteristics:
Contract size: 1,000,000 Euros
Basic points: 25 (0.0025)
Contract currency: EUR
Required margin: 900 Euros
Contract expiration: 15-06-2009
Opening position
On May 3rd, the 3 Month Euribor is at 1.2273%. The Futures contract with Euribor-3 Months as the underlying asset ("Euribor 3 Months, 10 Jun") is trading at 98.7650 (bid) / 98.7750 (ask) for the same date and time. This also means that it is trading at 1.2350 % (bid) / 1.2250 % (ask) [(100-price) / 100].
The investor expects that the European Central Bank (ECB) will rise interest rates to control inflation, and for this reason he/she sells one Futures contract:
Exposure: 1,000,000 x 0.0025 x 98.7650 = 246,912.5 Euros
Required margin: 900 euros
Closing position
Investor's expectations were correct and on 15th June of 2009, Euribor-3 Months has risen to 1.5130 %. On the same date and time the Futures contract is trading at 98.4850 (bid) / 98.4875 (ask), which means 1.5150 % (bid) / 1.5125 % (ask). The investor closes his position and makes a profit.
Trade summary
