39 lines
2.8 KiB
Plaintext
39 lines
2.8 KiB
Plaintext
Gapter 34: Futures and Futures Options 657
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The number of expiration months listed at any one time varies from one mar
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ket to another. Eurodollars, for example, have futures contracts with expiration dates
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that extend up to ten years in the future. T-bond and 10-year note contracts have
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expiration dates for only about the next year or so. Soybean futures, on the other
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hand, have expirations going out about two years, as do S&P futures.
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The day of the expiration month on which trading ceases is different for each
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commodity as well. It is not standardized, as the third Friday is for stock and index
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options.
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Trading hours are different, even for different commodities listed on the same
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futures exchange. For example, U.S. Treasury bond futures, which are listed on the
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Chicago Board of Trade, have very long trading hours (currently 8:20 A.M. to 3 P.M.
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and also 7 P.M. to 10:30 P.M. every day, Eastern time). But, on the same exchange, soy
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bean futures trade a very short day (10:30 A.M. to 2:15 P.M., Eastern time). Some mar
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kets alter their trading hours occasionally, while others have been fixed for years. For
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example, as the foreign demand for U.S. Treasury bond futures increases, the trad
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ing hours might expand even further. However, the grain markets have been using
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these trading hours for decades, and there is little reason to expect them to change
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in the future. ·
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Units of trading vary for different futures contracts as well. Grain futures trade
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in eighths of a point, 30-year bond futures trade in thirty-seconds of a point, while
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the S&P 500 futures trade in 10-cent increments (0.10). Again, it is the responsibili
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ty of the trader to familiarize himself with the units of trading in the futures market
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if he is going to be trading there.
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Each futures contract has its own margin requirements as well. These conform
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to the type of margin that was described with respect to the cotton example above:
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An initial margin may be advanced in the form of collateral, and then daily mark-to
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market price movements are paid for in cash or by selling some of the collateral.
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Recall that maintenance margin is the term for the daily mark to market.
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Finally, futures are subject to position limits. This is to prevent any one entity
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from attempting to comer the market in a particular delivery month of a commodi
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ty. Different futures have different position limits. This is normally only of interest to
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hedgers or very large speculators. The exchange where the futures trade establishes
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the position limit.
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TRADING LIMITS
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Most futures contracts have some limit on their maximum daily price change. For
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index futures, it was shown that the limits are designed to act like circuit breakers to
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prevent the stock market from crashing. Trading limits exist in many futures con-
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