How do futures work?

[jono1887]

How do you look up futures for indicies on Comsec?
how accurate are futures in determining the movements of stocks for any given day and how do they work?

 

[MRC & Co]

http://www.investopedia.com/university/futures/

 

[ivant]

Re: Futures

How do you look up futures for indicies on Comsec?
how accurate are futures in determining the movements of stocks for any given day and how do they work?

Didn't know they had futures on Commsec, so obviously I have no answer to the first one lol. Index Futures are based on an underlying instrument, eg the SPI200 is based on the ASX/S&P 200. How accurate are they? Depends when. SPI200 futs are split with quarter expirys, out of memory 6 quarters ahead. That means you get expiry in Mar, Jun, Sep, Dec. The idea of a futures speculator is to predict where the market will go over the quarter, which obviously has no accuracy. The front month futures contract will be more accurately based on the spot (ASX/S&P200), with the back contracts being more and more speculative and less volatile. The front month end up being rather reliable as a lot of the trading is done by institutions to hedge their risk. For example, if an institution believes that the market will fall over, instead of dumping their share portfolio they short sell SPI200 futs.

So you get this two-fold phenomenon, during the day, the futures are influenced by spot and during the night its influenced by overseas markets. You get the arbitragers working during the day to eradicate the inconsistencies in the market. So an argument could be made that both influence each other, the spot influences the futures and vice versa.

If you are thinking of buying into stocks because futures are pointing up, I dont think it will work. Markets are too efficient IMO.

Anyway hope some of that rambling was helpful. Hopefully someone will read through it and point out incorrectness

 

[ivant]

http://www.investopedia.com/university/futures/

Hahah or that

 

[MRC & Co]

Re: Futures

If you are thinking of buying into stocks because futures are pointing up, I dont think it will work. Markets are too efficient IMO.

This looks to be what he is thinking.

But you cannot do it. Trade futures if you want to trade futures and stocks if you want to trade stocks.

You can use futures as a strategic play, like you can options. With futures, you can use them to hedge your stock position (as Ivant already pointed out), or you can use more complex strategies such as calendar spreads which you cannot do with a cash index or individual stock. Others will simply arbitrage the cash to the futures (which is where the efficiency comes in) and this is done through bots, so you can't beat it.

 

[cutz]

Hi guys,

Just a couple of quick questions for you SPI experts,

Top of the market bid/ask on the sep and dec futures follow each other, what's driving this/why is it so?

Who is actually trading the SPI after hours?

I've often noticed the SPX makes a big push one way or another at 10.30 p.m. our time obviously also affecting the SPI, what happens at 10.30 ?

 

[skc]

Hi guys,

Just a couple of quick questions for you SPI experts,

Top of the market bid/ask on the sep and dec futures follow each other, what's driving this/why is it so?

Who is actually trading the SPI after hours?

I've often noticed the SPX makes a big push one way or another at 10.30 p.m. our time obviously also affecting the SPI, what happens at 10.30 ?

I would think there are arb bots out there ensuring the Sep / Dec contracts can't trade away from each other too much.

10:30pm is 8:30am US East Coast and lots of economic data gets released during that time.

 

[cutz]

Thanks skc,

I'll keep an eye on marketwatch, seems to have all the up to date news on it.