GET Financial Education Series - Futures
Financial Futures – Lesson 4
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Money, money, money! Have you ever stopped and thought of all of the various ways money circulates through the global economy? It circulates as Currencies, Bonds, Stocks and more. Unfortunately for our friend James he lost a large portion of his money in a freak accident with his cat and his computer. But he has a chance to recoup his losses by trading financial Futures.
Financial Futures are Futures contracts that are based on the following categories of financial instruments:
- Bonds
- Currencies
- Short-Term Interest Rates
- Stock Indices
Each of these categories has unique characteristics but all of them are connected because they all revolve around money and investment. To become a successful Futures trader it is important that you become familiar with both the common characteristics and the unique characteristics of each Futures contract and category.
Let's take a look at the following eight Futures contracts to get an idea of how this exciting segment of the Futures market works:
- 10 Year US T-Notes Composite (Bonds) ZN
- Euro-Bund, German Government (Bonds) FGBL
- Euro FX (Currencies) EC
- Australian Dollar (Currencies) AD
- 3 Month Euro Dollar (Short-term Interest Rates) GE
- 30 Day Federal Funds (Short-term Interest Rates) ZQ
- E-Mini S&P 500 (Stock Indices) EM
- FTSE 100 Index (Stock Indices) FFI
10 Year US T-Notes Composite (ZN)
10 year US T-Note Composite contracts are part of the Bonds sector and trade on the Chicago Board of Trade (CBOT) via GLOBEX. These contracts represent one U.S. Treasury note with a value of $100,000 and are quoted in U.S. dollars. Prices for 10 year US T-Note composite contracts move in 1/32 point increments with no limit on how far the price of each contract can move during a single trading day.
10 year US T-Note Composite contracts trade for the following expiration months:
| H |
March |
| M |
June |
| U |
September |
| Z |
December |
10 year US T-Note Composite contracts expire (stop trading) on the seventh business day preceding the last business day of the delivery month. 10 year US T-Note Composite contracts are cash settled.
10 year US T-Note Composite contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling U.S. stock market |
Increased Demand |
Unknown |
| Rising U.S. stock market |
Decreased Demand |
Unknown |
| Falling U.S. interest rates |
Increased Price |
Unknown |
| Rising U.S. interest rates |
Decreased Price |
Unknown |
Euro-Bund German Government (FGBL)
Euro-Bund German Government contracts are part of the Bonds sector and trade on the EUREX (EUREX). These contracts represent one European long-term debt instrument with a value of €100,000 and are quoted in Euros. Prices for Euro-Bund German Government contracts move in 0.01 point increments with no limit on how far the price of each contract can move during a single trading day.
Euro-Bund German Government contracts trade for the following expiration months:
| H |
March |
| M |
June |
| U |
September |
| Z |
December |
Euro-Bund German Government contracts expire (stop trading) two business days before the delivery date. Euro-Bund German Government contracts are cash settled.
Euro-Bund German Government contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling European stock market |
Increased Demand |
Unknown |
| Rising European stock market |
Decreased Demand |
Unknown |
| Falling European interest rates |
Increased Price |
Unknown |
| Rising European interest rates |
Decreased Price |
Unknown |
Euro FX (EC)
Euro FX contracts are part of the Currencies sector and trade on the Chicago Mercantile Exchange (CME) via GLOBEX. These contracts represent €125,000 each and are quoted in U.S. dollars. Prices for Euro FX contracts move in $0.0001 point increments with no limit on how far the price of each contract can move during a single trading day.
Euro FX contracts trade for the following expiration months:
| H |
March |
| M |
June |
| U |
September |
| Z |
December |
Euro FX contracts expire (stop trading) on the second business day before the third Wednesday of the expiry month. Euro FX contracts are physically delivered at settlement.
Euro FX contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling U.S. interest rates |
Increased Demand |
Unknown |
| Rising U.S. interest rates |
Decreased Demand |
Unknown |
| Falling European interest rates |
Decreased Demand |
Unknown |
| Rising European interest rates |
Increased Demand |
Unknown |
Australian Dollar (AD)
Australian dollar contracts are part of the Currencies sector and trade on the Chicago Mercantile Exchange (CME) via GLOBEX. These contracts represent 100,000 Australian dollars each and are quoted in U.S. dollars. Prices for Australian dollar contracts move in $0.0001 point increments with no limit on how far the price of each contract can move during a single trading day.
Australian dollar contracts trade for the following expiration months:
| H |
March |
| M |
June |
| U |
September |
| Z |
December |
Australian dollar contracts expire (stop trading) on the second business day before the third Wednesday of the expiry month. Australian dollar contracts are physically delivered at settlement.
Australian dollar contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling U.S. interest rates |
Increased Demand |
Unknown |
| Rising U.S. interest rates |
Decreased Demand |
Unknown |
| Falling Australian interest rates |
Decreased Demand |
Unknown |
| Rising Australian interest rates |
Increased Demand |
Unknown |
3 Month Euro Dollar (GE)
3 Month Euro Dollar contracts are part of the Short-Term Interest Rate sector and trade on the Chicago Mercantile Exchange (CME) via GLOBEX. These contracts represent $1,000,000 each and are quoted in U.S. dollars. Prices for 3 Month Euro Dollar contracts move in $0.005 point increments with no limit on how far the price of each contract can move during a single trading day.
3 Month Euro Dollar contracts trade for the following expiration months:
| F |
January |
| G |
February |
| H |
March |
| J |
April |
| K |
May |
| M |
June |
| N |
July |
| Q |
August |
| U |
September |
| V |
October |
| X |
November |
| Z |
December |
3 Month Euro Dollar contracts expire (stop trading) on the second London bank business day before the third Wednesday of the expiry month. 3 Month Euro Dollar contracts are cash settled.
3 Month Euro Dollar contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling LIBOR rates |
Decreased Demand |
Unknown |
| Rising LIBOR rates |
Increased Demand |
Unknown |
30 Day Federal Funds (EM)
30 Day Federal Funds contracts are part of the Short-Term Interest Rate sector and trade on the Chicago Board of Trade (CBOT) via GLOBEX. These contracts represent $5,000,000 each and are quoted in U.S. dollars. Prices for 30 Day Federal Funds contracts move in $0.005 point increments with no limit on how far the price of each contract can move during a single trading day.
30 Day Federal Funds contracts trade for the following expiration months:
| F |
January |
| G |
February |
| H |
March |
| J |
April |
| K |
May |
| M |
June |
| N |
July |
| Q |
August |
| U |
September |
| V |
October |
| X |
November |
| Z |
December |
30 Day Federal Funds contracts expire (stop trading) on the last business day of the expiry month. 30 Day Federal Funds contracts are cash settled.
30 Day Federal Funds contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling U.S. interest rates |
Decreased Demand |
Unknown |
| Rising U.S. interest rates |
Increased Demand |
Unknown |
E-Mini S&P 500 (ZQ)
E-Mini S&P 500 contracts are part of the Stock Indices sector and trade on the Chicago Mercantile Exchange (CME) via GLOBEX. These contracts represent $50 times the Standard & Poor's 500 Index each and are quoted in U.S. dollars. Prices for E-Mini S&P 500 contracts move in $0.0025 point increments with no limit on how far the price of each contract can move during a single trading day.
E-Mini S&P 500 contracts trade for the following expiration months:
| H |
March |
| M |
June |
| U |
September |
| Z |
December |
E-Mini S&P 500 contracts expire (stop trading) on the third Friday of the expiry month. E-Mini S&P 500 contracts are cash settled.
E-Mini S&P 500 contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling U.S. interest rates |
Increased Demand |
Unknown |
| Rising U.S. interest rates |
Decreased Demand |
Unknown |
| Falling U.S. corporate profits |
Decreased Demand |
Unknown |
| Rising U.S. corporate profits |
Increased Demand |
Unknown |
FTSE 100 Index (FFI)
FTSE 100 Index contracts are part of the Stock Indices sector and trade on the London International Financial Futures and Options Exchange (LIFFE) via Euronext. These contracts represent £10 times the Financial Times Stock Exchange (FTSE) 100 Index each and are quoted in British pounds sterling. Prices for FTSE 100 Index contracts move in £0.005 point increments with no limit on how far the price of each contract can move during a single trading day.
FTSE 100 Index contracts trade for the following expiration months:
| H |
March |
| M |
June |
| U |
September |
| Z |
December |
FTSE 100 Index contracts expire (stop trading) on the third Friday of the expiry month. FTSE 100 Index contracts are cash settled.
FTSE 100 Index contracts are affected by supply and demand, and the following table lists various factors that affect those levels of supply and demand.
| FACTOR |
RESULT |
TIME OF YEAR |
| Falling British interest rates |
Increased Price |
Unknown |
| Rising British interest rates |
Decreased Price |
Unknown |
| Falling British corporate profits |
Decreased Demand |
Unknown |
| Rising British corporate profits |
Increased Demand |
Unknown |
10 Year US T-Notes Composite (ZN)
