【Getting Started】Get a quick look at how to play and note the HKD Futures Index

When investing in stocks, investors often judge the direction of the entire market by some of the major stock indices, such as the Hang Seng index in Hong Kong stocks, the S&P 500 in U.S. stocks, the Nasdaq 100, etc. Although these stock indices cannot be traded directly, we can also trade them through ETFs, futures, options, rounds, etc. The following will give you a quick overview of the basics and considerations of futures indices.

The basic concept of term

Futures refers to index futures, a type of futures contract. SINCE FUTURES HAVE LEVERAGED ATTRIBUTES, YOU CAN BUY AND SELL ONLY BY PAYING THE APPROPRIATE MARGIN (DEPOSIT). GENERALLY, MAINSTREAM FUTURES HAVE STRONG LIQUIDITY AND ARE WIDELY WELCOMED BY INVESTORS. However, unlike other commodity futures, futures contracts such as soybeans, crude oil can be delivered in real terms, while index futures can only be delivered in cash.

With term, investors can easily achieve risk hedging, speculative spreads, and more, but most people trade periods primarily for the purpose of earning short line spreads. Simply put, it is a matter of looking at the future direction of the index and buying the corresponding period. As soon as the associated index rises, the price of the futures index rises, generating profits; conversely, if a bearish index, you sell the corresponding period, and if the associated index falls, you can make a profit.

Trading term refers to important factors to consider

An index options contract contains 6 important factors: contract name/code, benchmark index, last trading date (period settlement date), contract size, minimum unit of movement, initial margin, as shown in the following figure:

What are “Big Term” and “Detail”?

We often hear others say “long term” or “short term”. For example, perpetual futures are Hang Seng index futures, and small futures are small Hang Seng index futures.

Simply put, the difference between the two is that the contract size is smaller and the margin requirements are lower: the fixed-term contract size is an index point x HK$50, meaning that when the index is bought, the index rises by 1 point and the holder can earn HK$50 more; and a fixed-term contract size is an index point x HK$10. That is, when buying relative, the index rises by 1 point, and the holder can earn HK$10. In addition, the margin requirements of the two are different, with a fixed term margin requirement equal to about 5 times the term, and investors can choose based on their account assets and risk preferences.

What is a “Monthly Indicator”?

The monthly term refers to the index futures contract that expires in that month.

Usually we can choose to trade option contracts that are months, next months, next quarter months, next quarter months, and even longer, to find these period pointers by modifying the numbers in the code on the trading page. As an example of micro Nasdaq 100 index futures: assume MNQ2408 at the end of the month, change the code to MNQ2409 to indicate the next month period, and MNQ2412 refers to the next quarter's month period, so on.

If you buy and hold term indices before the closing trading date (period refers to settlement date), assuming that the index of the settlement time is higher than the purchase price, then a profit will be made, otherwise a loss will result; profits and losses will be settled in cash. Many investors also choose to extend their investment cycle through “Turnover Period”, which is simply a closing period that is about to expire before buying a period that expires next month.

What is Futures Settlement Date (Last Trading Day)?

Term refers to the settlement date that refers to the last trading day of the index futures contract. As an example of Hang Seng Index futures, the settlement date is the second trading day of the month's countdown. Hold-period investors can choose whether to “roll over”, “close” or “hold until settlement” depending on their situation.

Term refers to the settlement price after closing on the day of settlement, the exchange calculates the settlement price to close and settle contracts that have not been closed. If the settlement price is higher than the purchase price of the contract, the period indicates that the buyer has made a profit, but a loss is generated.

What are “high water” and “low water”?

High water, low water, what does it mean? In fact, both refer to the relationship between the futures price and the spot price.

In essence, the futures price is an estimate of the spot price on the future maturity date. Purchases of futures are not settled immediately, but wait until the end of the month to settle them. However, before futures settlement, the market may have a different view on the direction of the spot post-market, so futures prices may fluctuate continuously and diverge from the spot price. Finally, the exchange calculates the final settlement price and settles based on the circumstances of the last trading day.

• High water

  High water, also called rising water, means that the futures price is higher than the spot price;

• Low water

  Low water, also known as dewatering, means that the futures price is lower than the spot price.

As an example of perpetual futures, in general, if the emergence period indicates a high water situation, the futures index is higher than the constant index, indicating that investors in the futures market generally look forward to the market moving forward and are willing to buy the index at a higher price relative to the spot market.

Conversely, if futures are low, it may indicate that futures investors expect future indices to fall and lack confidence in the future. However, if a fixed index component net division is encountered, constant index futures are likely to be low.

How much deposit/margin is required in the account at the time of the transaction?

As mentioned above, you need to have sufficient initial margin in your account to trade one term. In addition to the initial margin, attention should be paid to maintaining the margin when referring to the holding period. Margin requirements for different periods are not the same, and exchanges adjust margin requirements at any time according to market conditions.

In the event of severe market volatility and insufficient funds in the account, the broker staff may alert investors to require investors to deposit funds or liquidate some assets as soon as possible to reduce the overall risk of the account. If market volatility increases further, the funds in the account fall below the maintenance margin, traders may Can close positions directly for customers to control risk.

If you would like to inquire about margin requirements for a specific period, please click here:Margin requirements for futures

Futu offers a Futures Benefit Guarantee Scheme to futures traders in Hong Kong and the United States. For information on the instrument, please click here:Futures Preferential Margin Scheme

The trading time of the futures

Futures refer to trading times that are inconsistent with stocks, and trading times are different for different markets. For example, the trading hours of Hong Kong stocks (including night) and US equity periods are as follows:

What is night time?

In addition to the morning and afternoon continuous trading sessions, some Hong Kong futures can also be traded on the night chart. Futures contracts traded at night will be counted as T+1 day orders.

The types of futures contracts that Futu supports night trading are:CONSTANT INDEX FUTURESand options (including cycle options),Minor Index Futuresand options (including cycle options),Benchmark Futuresand options (including cycle options),Sogoku Futuresand options (including cycle options), MSCI related index futures, USD gold futures.

How to trade futures on Futubull?

1. Open the Futubull app, click “Market” in the navigation bar below, and select “Futures” on the top of the page;

2. On the All page, in the Index Futures column, select the corresponding period index; click the arrow to expand more markers;

3. Or select a different market, such as “Hong Kong Futures” or “US Futures”, and select more of the market's mainstream indices in “Index Futures”

4. Click on the term index name, such as “Hang Seng Index Futures”, to access the quotation page for that period index;

5. Scroll down the page, click on “Contract Details” to see the basic information that refers to the period;

6. Click “Trade” in the lower left corner to enter the order page;

7. Change period refers to a code that changes the expiration month of the contract; you can also view the initial margin requirement for an opening period on this page.