Investments and speculation on the stock exchange: how is futures trading on the dollar

Good day to all!

In this article I want to share my knowledge on the topic "Investments and speculation in the stock market", in particular, it will be about derivatives. Do not be alarmed by this scary word, because after reading this article you will understand no worse than any professional trader. Please note that to understand, this does not mean to earn. The article is exclusively informative in nature, and we will consider the example of the futures on the dollar, as recently I have been seeing increased interest in this topic among people who have nothing to do with this business.

So, for starters, you should have an understanding of the main sections of our domestic Moscow Exchange (data on 02/06/2015):



You can follow these data online on the main page of the exchange websitemoex.com
As you can see, the stock market, which includes stocks, bonds and shares traded on the stock exchange, is only 25%. A comparable daily turnover is in the derivatives market, which includes trading in futures and options (in a word, derivatives). And a significant share of 50% is held by the foreign exchange market, which is not surprising, since the main operations between banks in foreign currency are held in this section. But back to the topic of the post, to the derivatives market, as in this section there is a very big advantage over the foreign exchange market. In more detail, we will focus on futures, since options are a rather complicated tool for the average person, and options are mainly used by professional market players.

Futures contract- it is a derivative instrument for the sale and purchase of the underlying asset, which can be an index, a stock, a currency pair or goods (oil, gold, etc.), which has two mandatory parameters - price and time of sale (delivery). For example, consider dollar futures.



Each contract has its own short name (Si - futures on the dollar, Eu - on the euro) and its expiration date. Below are the main parameters of the contract, for convenience, I have identified those that we will consider:



On the exchange, futures are traded in lots. One lot of futures per dollar is equal to $ 1,000, so the quote of 66782 rubles is equivalent to $ 1,000.

What does the term of the contract indicated on the short name of the Si-3.15 futures contract mean? If you think that in the future the dollar will be higher than the current price, then you buy at the current price of 66782 rubles and suppose you forget for a while. Given that each futures has its own “life span”, then on March 16 (expiration day) your current contract will end its existence and if that day the average price (namely, as indicated in the parameters the average price in the time interval 12.25-12.30 MSK) will be equal to 70,000, then you will receive a profit of 3218 rubles per lot). In other words, you initially bought at the price of the future 66782, since the market considered that such a price would be March 16th.

Futures contracts can be settlement, both in our example, and delivery. If the dollar futures were deliverable, then on March 16, $ 1000 would have fallen to your foreign currency account at a price of 66.78, you could immediately sell it at a price of 70 on the MICEX currency section and would have made a profit of 3218 rubles. This is exactly what happens with deliverable futures, which include all futures contracts, where the underlying asset is a stock (Gazprom, Sberbank, etc.).

Of course, you didn’t have to keep this lot until March 16, you could sell it at any time. And I must also say that the result of the transaction is not formed at the time of closing the transaction, as is the case in stocks. The futures contract has a daily calculation of the result at the end of the trading session at 13.45 and 18.30 Moscow time (day and evening clearing), so the account will change every day. This, by the way, is a very important feature of the derivatives market.

If you originally planned to keep the “bought” dollars longer than before March 16, then there are two options: either you go to the next contract on March 16, it will already be Si-9.15, or you could initially buy the September contract. There are only four expirations in a year (March, June, September and December).

Now let's deal with the "economy" of our transaction. And here the fun begins.

As can be seen from the table of futures parameters, there is such a very important parameter as Guaranteed Collateral (GO), i.e. this is the money that the exchange freezes from your account. In our example, GO futures for a dollar is 8086 rubles. As a result, you bought $ 1,000 for 66782, and "paid" only 8086 rubles. The rest of the funds will remain in your account. Technically, you have an 8-fold leverage, in other words, you can say that you bought “on credit”.

Leverage = 66782 rubles / 8086 rubles = 8.25
But what’s most important is the free shoulder! You will not pay a penny for this marginality, as it would be with the purchase of shares or currency in the currency section of the MICEX.

We continue our “economy”. If you bought 1 lot on the MICEX currency section, then you would use 100% of your funds. As a result, the profit from the transaction amounted to about 5%.

Profit on the MICEX currency section = 3218 rubles / 66782 rubles = 4.8%
But in our example, the profit will be much higher, since we used the “leverage effect”. After buying 1 lot, as you already know, the exchange “freezes” 8086 rubles as a GO. Further, given that the result due to the movement of the quote changes every day, the rate may fall, so there should be a certain margin in the account, for example, 20 thousand rubles. The remaining funds 38696 rubles. we may use for other purposes.

Profit on the derivatives market = 3218 rubles / (8086 + 20 000) rubles = 11.4%

You tell me what else you need to consider the commission for the transaction? The fact is that it is so small that it should not even be taken into account in the calculations. The average commission from brokers for an operation is 2 rubles per 1 lot (contract). As you know, the costs of the entire transaction will be equal to only 4 rubles!

You should be warned against the mistake that all sophisticated "investors" make. Given the free leverage and low GO, newly-minted participants enter the transaction with all available funds, i.e. in our example, you could buy 8 contracts, which is equivalent to 8000 dollars. This is very dangerous and, as a rule, always leads to large losses, so I highly recommend using the maximum first shoulder.