DOCSLIB.ORG

What Are Dow Futures?

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
What Are Dow Futures? Dow Futures vs. S&P Futures – Which is better for Day Traders? The Dow futures (YM) and the S&P500 futures (ES), along with the Nasdaq100 futures (NQ) are the three biggest and popular futures trading instruments for day traders. You might want to add the Russell 2000 futures (ER) into that list as well. With so many different index futures available, a futures day trader could no doubt be left wondering as to which of these four index futures makes for the most ideal instrument to trade. The common factor behind all these four types of index futures is that they track a broad set of stocks in the US equity markets. However, on closer observation there are technical differences that can become the primary factor between a successful and a disastrous trade. With the Dow and S&P futures being the most widely traded index futures and followed closely, the question is which of these two make for a better fit for traders. In this article we take a look at the differences between the Dow and the S&P500 futures so that you can make an informed decision on which of these two index futures are more ideally suited to your trading profile. What are Dow Futures? Dow futures contracts track the underlying asset, which is the Dow Jones industrial average. The DJIA or the Dow 30 tracks the thirty publicly listed companies on the US stock markets. It is the second oldest stock index (since 1896) and was named after the founder, Charles Dow of the Dow Jones & Company. The Dow index is currently owned by the S&P Dow Jones indices. Since its inception however, the 30 listed companies have changed and the name “industrial” doesn’t need to be taken literally. The most important aspect of the Dow Jones Industrial average is that the 30 components or the companies listed on the stock are price weighted. Price weighted means that a component with a higher stock price is given more weightage than a component with a lower stock price. Below are the 30 companies currently listed on the Dow Jones Industrial Average. Verizon Goldman Sachs McDonalds Disney Dupont Comm. American 3M Travelers Caterpillar Coca-Cola Express UnitedHealth Chevron Exxon Mobil Walmart Intel Group Johnson & Procter & IBM Merck Pfizer Johnson Gamble JPMorgan Boeing Apple Microsoft GE Chase United Cisco Home Depot Visa A Nike B Technologies Systems The Dow Futures merely tracks the index performance of the combined 30 companies listed and the Dow Index is considered to be a bell-weather of the US economy. Dow 30 Industrial Average, Company by weight age The weightage chart shows that for example, Goldman Sachs has a strong influence on the Dow, with the weightage of nearly 8%. On the other hand, the same stock has an approximate weightage of just 0.45% in the S&P500 index. One of the main benefits of trading the Dow futures is that it offers a built in leverage which allows day traders to make significant gains on the price volatility. The Dow futures come with a multiplier of 10, meaning that it offers a leverage of 1-10. In other words, the standard Dow futures contract controls 10 times the actual price value. So, if the Dow futures contract was trading at 18000, then a single futures contract has a market value of 180,000. A one-dollar move in the Dow would result in a $10 increase or a decrease. Besides the standard Dow futures, traders can also access the mini-sized Dow futures contract, which has a multiplier of 5 and is often referred to as the $5-dow futures contract. As the name suggests, the mini-sized Dow futures has a $5 value for a 1 point move in the Dow index, which is exactly half of the standard Dow futures. Therefore, if the Dow futures contract was trading at 18000, the mini-sized Dow futures contract controls 90,000. With a multiplier of 5, one point move results in a $5 increase or decrease in price. To put it differently, if the Dow moved 100 points, then the standard Dow futures would result in $1000 profit or loss, while a $5 mini-sized Dow futures results in a $500 profit or loss. Besides the $10 and $5 Dow futures contract, there is also a larger contract with a multiplier of $25. Among the three, the $10 and the %5 Dow futures contract make up for the most popular with the $5 mini-sized Dow futures being the most popular. Trading Volume Comparison of Dow and S&P500 futures There are many factors that can determine the answer to this question such as, your trading capital, your risk tolerance as well as the technical aspects of spread, the dollar value per tick and so on. While there are many articles that talk on the pros and cons of trading one of the two index futures, the truth is that there is no best index futures contract that you can trade. If that were the case, it would easily reflect on the trading volumes from the exchange for a particular index futures contract. The chart below shows a comparison of the trading volumes between the E-mini S&P500 futures (ES) and the Dow futures (YM). You can see that the trading volumes for the S&P500 futures are 10 times those of the Dow. SP500 vs Dow Futures Trading Volume Comparison Contract comparisons for Dow and S&P500 futures Comparing the contract specifications for the Dow and the S&P500 futures can be a good way to get an insight into the requirements and the potential for trading these contracts and even help traders to figure out which of these two index futures is more ideal. Ticker ES YM Tick Size 0.25 1.00 Tick Value $12.50 $5.00 Dollar value $50 (ex:2100 -> 2101) $500 (ex: 18000 -> 18100) Mar (H), June (M), Sep Mar (H), June (M), Sep Expiry Months (U), Dec (Z) (U), Dec (Z) Spread comparison for Dow and S&P500 futures When attempting to understand if the Dow futures or the S&P500 futures are more suited for your day trading, comparing the spreads can be an important factor that can influence your decision. The chart below shows a comparison of the Dow and the S&P500 futures chart. You can see that the spread is 5 points for the Dow futures and 0.25 points for the S&P500 futures. This translates to $25 in spread that you need to pay when trading the Dow futures, while for the S&P500; the spread is only $12.50. Dow vs SP500 Futures Spread Comparison It might seem that the S&P500 futures are less expensive contracts to trade compared to the Dow. To get a better idea of the trading volatility between the two instruments, if you apply the ATR on the daily chart, the average range for the Dow futures is about 80 points, while for the S&P500 futures; the average range is 12.50 points. In dollar value, this amounts to $400 and $625. It is easy to see that the S&P500 futures (mini-sized) contracts so far has a tighter spread and also the intraday range offers more value compared to the Dow futures. In terms of the day trading margins, both the Dow and the S&P500 futures contracts have almost similar margin requirements. On average, the initial margin required to trade the Dow futures is about $500, while the initial margin requirements to day trade the S&P500 futures is about $400. Trading Dow Futures or the S&P500 Futures? With the above information, a futures day trader should be able to figure out which of these two stock index futures are more suited for their trading, which comes down to checking with your trading strategy, risk management style, trading capital, among other things will compliment one of the two stock index futures. No matter which of the two futures that you choose to trade, you can always refer to both the Dow futures chart and the S&P500 futures chart as both the indexes are nearly correlated, perhaps with a certain degree of lag. Dow Futures Chart vs SP500 Futures Chart The above chart shows a side by side comparison of the Dow futures and the S&P500 futures price chart. You can see as an example that on an intraday basis, a 175 point move in the Dow futures chart results in a dollar equivalent value of $875. On the other hand a similar move in the S&P500 futures chart as a 31.5 points price movement, which at a rate of $50 per point results in $1,575. It is evident that trading the S&P500 futures contracts (mini- sized) can yield bigger returns but also comes with higher risks. On the other hand, the price movement in the Dow is relatively smaller both in terms of the point move and the dollar value of the price movement on the charts. Traders should also consider the fact that in terms of sector weightage, the Dow Jones leans 20% to the financials with industrials coming in at a close 19%. On the smaller end of the scale, telecommunications, basic materials, and consumer goods have a weighting of 1.79%, 2.64% and 6.19% respectively. This weightage is more evened out in the case of the S&P500 index where interestingly the weightage is more towards Information Technology, healthcare and then financials.
Load more

Recommended publications
  • The Design of Financial Exchanges: Some Open Questions at the Intersection of Econ and CS
    The Design of Financial Exchanges: Some Open Questions at the Intersection of Econ and CS Eric Budish, University of Chicago Simons Institute Conference: Algorithmic Game Theory and Practice Nov 2015 Overview 1. The economic case for discrete-time trading I Financial exchange design that is predominant around the world continuous limit order book is economically awed I Flaw: treats time as a continuous variable (serial processing) I Solution: treat time as a discrete variable, batch process using an auction. Frequent batch auctions. I Eric Budish, Peter Cramton and John Shim (BCS) 2015, Quarterly Journal of Economics 2. The computational case for discrete-time trading I Discrete time respects the limits of computers and communications technology. Not innitely fast. I Benets for exchanges, algo traders, regulators I Qualitative/informal argument in BCS 2015, would benet greatly from Econ/CS research 3. Other Econ/CS Questions about the Design of Financial Exchanges I Flash crashes I Speed vs. Smarts Tradeo I Circuit Breakers Overview 1. The economic case for discrete-time trading I Financial exchange design that is predominant around the world continuous limit order book is economically awed I Flaw: treats time as a continuous variable (serial processing) I Solution: treat time as a discrete variable, batch process using an auction. Frequent batch auctions. I Eric Budish, Peter Cramton and John Shim (BCS) 2015, Quarterly Journal of Economics 2. The computational case for discrete-time trading I Discrete time respects the limits of computers and communications technology. Not innitely fast. I Benets for exchanges, algo traders, regulators I Qualitative/informal argument in BCS 2015, would benet greatly from Econ/CS research 3.
    [Show full text]
  • Dow Jones Industrial Average Futures and Options
    EQUITY PRODUCTS Dow Jones Industrial Average Futures and Options E-mini Dow ($5), DJIA ($10) and Big Dow DJIA ($25) contracts offer flexible opportunities to trade the large-cap U.S. Equity market. About the Dow Jones Industrial Average Benefits The Dow Jones Industrial Average (DJIA) is a price-weighted index of 30 blue chip U.S. companies • Transparent, deep liquid markets representing nine economic sectors including financial service, technology, retail, entertainment and consumer goods. The leadership position of the component stocks in The Dow tends to result in an • Global access virtually 24 hours a day to extremely high correlation of the DJIA to broader U.S. indexes, such as the S&P 500 Index. the speed and efficiency of electronically traded contracts Trading Platform • Simplified benchmarking with broad U.S. These index contracts are now available on CME Globex – a robust electronic trading platform stock market exposure through 30 delivering fast, efficient and anonymous trading. For more information on CME Globex, representative blue-chip stocks visit www.cmegroup.com. • Centralized source to manage all your global equity exposure needs E-mini Dow ($5) Futures Average Daily Volume by Month • Favorable performance bond (margin) 250,000 requirements vs. alternative trading instruments 200,000 • Central clearing and counterparty guarantee of CME Clearing 150,000 100,000 www.cmegroup.com/equityindexresearch Learn how to take advantage of 50,000 opportunities from a popular S&P 500 vs DJIA spread using CME Group Equity 0 Index contract 07 07 07 b − 03 b − 05 b − 06 eb − 04 eb − 07 Apr − 02Jun − Aug02 − 02Oct − 02Dec − 02Fe Apr − 03Jun − Aug03 − 03Oct − 03Dec − 03F Apr − 04Jun − Aug04 − 04Oct − 04Dec − 04Fe Apr − 05Jun − Aug05 − Oct05 − 05Dec − 05Fe Apr − 06Jun − Aug06 − Oct06 − 06Dec− 06F Apr − 07Jun − Aug07 − Oct − Dec − For more information, visit www.cmegroup.com/dow.
    [Show full text]
  • Price Drift Before US Macroeconomic News
    Working Paper Series Alexander Kurov, Price drift before U.S. Alessio Sancetta, Georg Strasser macroeconomic news: private and Marketa Halova Wolfe information about public announcements? No 1901 / May 2016 Note: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB. Abstract We examine stock index and Treasury futures markets around releases of U.S. macroeconomic announcements. Seven out of 21 market-moving announcements show evidence of substantial informed trading before the official release time. Prices begin to move in the \correct" direction about 30 minutes before the release time. The pre-announcement price drift accounts on average for about half of the to- tal price adjustment. These results imply that some traders have private infor- mation about macroeconomic fundamentals. The evidence suggests that the pre- announcement drift likely comes from a combination of information leakage and superior forecasting based on proprietary data collection and reprocessing of public information. Keywords: Macroeconomic news announcements; financial markets; pre-announcement effect; drift; informed trading JEL classification: E44; G14; G15 ECB Working Paper 1901, May 2016 1 Non-technical Summary Macroeconomic indicators play an important role in business cycle forecasting and are closely watched by financial markets. Some of these indicators appear to influence financial market prices even ahead of their official release time. This paper examines the prevalence of pre-announcement price drift in U.S. stock and bond markets and looks for possible explanations. We study the impact of announcements on second-by-second E-mini S&P 500 stock index and 10-year Treasury note futures from January 2008 to March 2014.
    [Show full text]
  • Index Last Change Stock Futures Little Changed After S&P Notches Another
    DAILY MARKET REPORT 26.08.2020 Index Last Change DJIA 28,248.44 60.02 S&P 500 3,443.62 12.34 NASDAQ 11466.47 86.75 NIKKEI 23,301.54 4.77 HANG SENG 25,488.78 2.56 DJ EURSTOXX 50 3,329.71 2.03 FTSE 100 6,037.01 67.72 CAC 40 5,008.27 0.38 DAXX 13,061.62 4.92 US Stock futures little changed after S&P notches another record U.S. stock futures were little changed in early morning trading on Wednesday after the S&P 500 closed at a new record high. Dow futures dipped 43 points. The S&P 500 futures contract sat just below the flatline while Nasdaq 100 futures traded in positive territory. Software company Salesforce reported blowout earnings after the bell on Tuesday. The soon-to-be Dow member rose more than 13% in extended trading after beating on the top and bottom lines of its second quarter results. Salesforce will replace Exxon Mobil, Amgen will replace Pfizer and Honeywell International will replace Raytheon Technologies in the Dow average, S&P Dow Jones Indices said Monday. The changes are driven by Apple’s coming stock split, which will reduce the technology weighting in the price-weighted average. HP Enterprise, homebuilder Toll Brothers and retailer Urban Outfitters jumped after the bell following their better-than-expected earnings. On Tuesday, the Dow Jones Industrial Average lost 60 points as Apple, the gauge’s biggest influence, snapped a five-day winning streak. The tech giant closed the session down about 0.8%.
    [Show full text]
  • For Additional Information
    April 2015 Attached please find the updated Foreign Listed Stock Index Futures and Options Approvals Chart, current as of April 2015. All prior versions are superseded and should be discarded. Please note the following developments since we last distributed the Approvals Chart: (1) The CFTC has approved the following contracts for trading by U.S. Persons: (i) Singapore Exchange Derivatives Trading Limited’s futures contract based on the MSCI Malaysia Index; (ii) Osaka Exchange’s futures contract based on the JPX-Nikkei Index 400; (iii) ICE Futures Europe’s futures contract based on the MSCI World Index; (iv) Eurex’s futures contracts based on the Euro STOXX 50 Variance Index, MSCI Frontier Index and TA-25 Index; (v) Mexican Derivatives Exchange’s mini futures contract based on the IPC Index; (vi) Australian Securities Exchange’s futures contract based on the S&P/ASX VIX Index; and (vii) Moscow Exchange’s futures contract based on the MICEX Index. (2) The SEC has not approved any new foreign equity index options since we last distributed the Approvals Chart. However, the London Stock Exchange has claimed relief under the LIFFE A&M and Class Relief SEC No-Action Letter (Jul. 1, 2013) to offer Eligible Options to Eligible U.S. Institutions. See note 16. For Additional Information The information on the attached Approvals Chart is subject to change at any time. If you have questions or would like confirmation of the status of a specific contract, please contact: James D. Van De Graaff +1.312.902.5227 [email protected] Kenneth M.
    [Show full text]
  • “Spoofing”: US Law and Enforcement
    Resource ID: w-020-9748 “Spoofing”: US Law and Enforcement PRACTICAL LAW FINANCE AND AARON STEPHENS, ZACH FARDON, KATHERINE KIRKPATRICK, MICHAEL WATLING, MATTHEW WISSA, AND MARGARET NETTESHEIM, KING & SPALDING LLP Search the Resource ID numbers in blue on Westlaw for more. A Practice Note providing an overview of the This Note summarizes US law on spoofing and how spoofing is US legal and regulatory framework relating prosecuted in the US. This Note also provides examples of the types of trading practices that may constitute spoofing. to spoofing, a market manipulation offense, including relevant criminal prosecutions and US SPOOFING LAW AND ENFORCEMENT: AT A GLANCE civil enforcement cases. Enforcement CFTC (civil). authorities Securities and Exchange Commission (SEC) (civil). Financial Industry Regulatory Authority Spoofing is a form of market manipulation in which a trader submits (FINRA) (civil). and then cancels offers or bids in a security or commodity on an Department of Justice (DOJ) (criminal). exchange or other trading platform with the co-existent intent to Current Law Dodd-Frank Act, Section 747. cancel the bid or offer before it can be executed. Commodity Exchange Act (CEA), Section 4c(a)(5)(C). Spoofing may take various forms, but it often involves the placing of Securities Exchange Act of 1934, as Amended non-bona-fide, large or small volume orders on one side of the order (Exchange Act), Sections 10(b) and 9(a)(2). book and then canceling those orders either immediately or within Securities Act of 1933, as Amended (Securities Act), a short period of time after placement. A spoofer’s intent may be to Section 17(a).
    [Show full text]
  • Network Topology and Order Trading Strategies in High Liquidity Markets
    S IEF Einaudi Institute for Economics and Finance ERIE EIEF Working Paper 11/10 May 2010 Are Networks Priced? Network Topology and Order Trading Strategies in High Liquidity Markets by Ethan Cohen-Cole (University of Maryland - College Park) Andrei Kirilenko (Commodity Futures Trading Commission) Eleonora Patacchini (University of Rome “La Sapienza”) EIEF WORKING PAPER S Are Networks Priced? Network Topology and Order Trading Strategies in High Liquidity Markets Ethan Cohen-Cole∗ Andrei Kirilenko University of Maryland - College Park Commodity Futures Trading Commission Eleonora Patacchini University of Rome - La Sapienza April 29, 2010 Abstract Network spillovers explain as much as 90% of the individual variation in returns in a fully electronic market. We study two fully electronic, highly liquid markets, the Dow an S&P 500 e-mini futures markets. Within these markets, we use a unique dataset of realized trades that includes the precise topology of transactions; this topology allows us to identify precisely both the relevance of network structure as well as endogenous network spillovers. Within these markets, we will show that network positioning on the part of trader leads to remarkable spillovers in return. Empirically, we estimate that the implied average multiplier, the ratio of a individual level shock to the total network one, is as large as 20. A gain of $1 for a trader leads to an average of $20 in gains for all traders and much more for connected ones. In a zero-sum market, such as the one in this study, this suggests a very large re-allocation of returns according to network structure.
    [Show full text]
  • Last Change Dow Futures Drop More Than 100 Points After
    DAILY MARKET REPORT 19.07.2021 Index Last Change DJIA 34,687.85 299.17 S&P 500 4,327.16 32.87 NASDAQ 14427.24 115.89 NIKKEI 27,613.88 389.20 HANG SENG 27,548.51 456.17 DJ EURSTOXX 50 4,035.77 20.62 FTSE 100 7,008.09 3.93 CAC 40 6,460.08 33.28 DAXX 15,540.31 89.35 US Dow futures drop more than 100 points after major averages post first negative week in four U.S. stock index futures were lower during overnight trading on Sunday, after the major averages posted their first negative week in four. Futures contracts tied to the Dow Jones Industrial Average slid 169 points. S&P 500 futures and Nasdaq 100 futures both also traded in negative territory. The Dow and S&P fell 0.52% and 0.97% last week, respectively. The Nasdaq Composite, meanwhile, was the relative underperformer, dropping 1.87%, to post its worst week since May. Inflation fears weighed on stocks, with a U.S. consumer sentiment index from the University of Michigan released on Friday showing that consumers believe prices will jump 4.8% over the next year. This is the steepest climb since August 2008. Earlier in the week, the June Consumer Price Index showed that inflation jumped 5.4% year-over- year, spooking investors. On the flip side, retail sales numbers released Friday came in better-than-expected, rising 0.6% in June compared to expectations of a 0.4% decline. “Inflation is still being driven by a relatively narrow range of goods and services impacted by the pandemic,” UBS said in a recent note.
    [Show full text]
  • 04-03575 Minidowbrochpdf
    EQUITIES CBOT® mini-sized DowSM Futures and Options Business Development 141 W. Jackson Boulevard Chicago, IL 60604-2994 312-341-7955 • fax: 312-341-3027 New York Office One Exchange Plaza 55 Broadway, Suite 2602 New York, NY 10006 212-943-0102 • fax: 212-943-0109 European Office St. Michael’s House 1 George Yard London EC3V 9DH United Kingdom 44-20-7929-0021 • fax: 44-20-7929-0558 Latin American Contact 52-55-5605-1136 • fax: 52-55-5605-4381 SM CBOT Dow Complex www.cbot.com CONTRACT CONTRACT VALUE CBOT SYMBOL PLATFORM CBOT ® mini-sized $5 x index YM Electronic DowSM Futures ($5) value CBOT ® mini-sized $5 x index OYM Electronic Dow Options ($5) value ACCELERATE DJIASM Futures $10 x index value DJ/ZD Open outcry/Electronic ©2004 Board of Trade of the City of Chicago, Inc. All rights reserved. YOUR TRADING! DJIA Options $10 x index value DJC, DJP/OZD Open outcry/Electronic The information in this publication is taken from sources believed to be reliable. DJ US TMI SM Futures $500 x index value TMI Electronic However, it is intended for purposes of information and education only and is not guaranteed by the Chicago Board of Trade as to accuracy, completeness, nor any trading result, and does not constitute trading advice or constitute a solicitation of the purchase or sale of any futures or options. The Rules and Regulations of the Chicago Board of Trade should be consulted as the authoritative source on all current contract specifications and regulations. Visit www.cbot.com/dow to find: “Dow JonesSM,” “The DowSM,” “Dow Jones Industrial AverageSM,” and “DJIASM” are service marks of Dow Jones & Company, Inc.
    [Show full text]
  • Fishkin, Chernomzav, and TABFG Are Represented by The
    Case 2:03-cv-03766-MAM Document 212 Filed 06/17/08 Page 1 of 99 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA CAL FISHKIN, et al., : CIVIL ACTION : v. : : SUSQUEHANNA PARTNERS, G.P., : et al., : : v. : : TABFG, LLC, et al., : NO. 03-3766 MEMORANDUM AND ORDER McLaughlin, J. June 17, 2008 This case arises from a dispute between a securities trading firm, Susquehanna International Group, LLP (“SIG”), and two of its former employees, Cal Fishkin and Igor Chernomzav. Fishkin and Chernomzav left SIG and formed a joint venture called TABFG, LLC (“TABFG”) in partnership with another company, NT Prop. Trading, LLC (“NT Prop”).1 Fishkin and Chernomzav began this action by seeking a declaratory judgment to declare invalid the covenants not to compete that were part of their employment contracts with SIG. SIG, in response, filed a counterclaim against Fishkin and Chernomzav for breach of the covenants and for tortious interference, conspiracy, misappropriation, and conversion. These latter claims were based 1 Fishkin, Chernomzav, and TABFG are represented by the same counsel and will be referred to where appropriate as the “Fishkin parties.” Case 2:03-cv-03766-MAM Document 212 Filed 06/17/08 Page 2 of 99 on the allegation that Fishkin and Chernomzav had used SIG’s proprietary trading formula, called either the “Dow Fair Value formula” or “SIG’s Dow Fair Value formula,” in their competing joint venture. SIG also impleaded TABFG and NT Prop as third- party defendants to all claims except those for breach of contract. The Court held a bench trial from April 23 to April 26, 2007, on SIG’s counterclaims against Fishkin, Chernomzav, TABFG, and NT Prop.
    [Show full text]
  • Relationship of Causality Between Spot and Futures Markets of Borsa Istanbul Index 30 and Dow Jones Industrial Average
    Preprints (www.preprints.org) | NOT PEER-REVIEWED | Posted: 10 November 2019 doi:10.20944/preprints201911.0106.v1 Article Relationship of Causality Between Spot And Futures Markets of Borsa Istanbul Index 30 and Dow Jones Industrial Average Letife Özdemir1, Ercan Özen 2 and Simon Grima3,* 1 Afyon Kocatepe University, Afyonkarahisar, Turkey; [email protected] 2 University of Uşak, Uşak Turkey, [email protected], [email protected] 3 University of Malta, Faculty of Economics, Management and Accountancy, Department of Insurance. [email protected] 4 This paper is revised and extended version of the conference paper which was presented at the 22th Finance Symposium, held on the10-13 October 2018 in Mersin-Turkey. * Correspondence: [email protected]; Abstract: Futures markets are mainly used as a tool for price discovery and for risk management on the spot markets and enable diversification for international portfolio investments. With this study we aim (1) to investigate the causality relationship between futures markets and spot market and (2) to examine the causality relationship between futures markets and spot markets in different countries. We are interested in both the futures markets - spot market relations and the interactions between the markets at international level. For variables we used the the BIST30 spot index and BIST30 futures contract representing the Borsa Istanbul market and the Dow-Jones 30 index and Dow-Jones 30 futures contract, which are the most important indices representing the US markets. Daily closing price data for the period between 2nd January, 2009 and 18th June, 2018 were analyzed using correlation, unit root test, causality test and regression equations.
    [Show full text]
  • Regional Relevancy of S&P 500® and Dow Jones Industrial Average
    Index Education Regional Relevancy of S&P 500® and Dow Jones Industrial Average® Futures in Asia Contributors Global markets are increasingly integrated, driven by the diversified global supply chain, deregulation of capital markets, and technological advances. Tianyin Cheng Senior Director The interconnection of global markets has been the key driver for co- Strategy Indices movement of market returns, especially during periods of crisis. This has [email protected] important consequences in terms of portfolio hedging and risk management. Izzy Wang Analyst Meanwhile, with the continued growth in exchange-traded derivatives Strategy Indices supported by the need for increased price transparency and liquidity, [email protected] investors have sought to efficiently integrate listed derivatives into their portfolios. This paper presents the regional relevancy of S&P 500 and Dow Jones Industrial Average (DJIA) futures for hedging and risk management use by Asian investors. While the ecosystem around the S&P 500 and DJIA covers multiple areas, including trading of options, ETFs, mutual funds, etc., we are only capturing part of the complexity of Asian trading by limiting the study scope to futures. We evaluate the usefulness of those instruments through the following metrics. • Liquidity: As shown by aggregate U.S. dollar notional total value traded for the futures contracts on the two U.S. benchmarks during Asian trading hours.1 • Co-movements of markets: As measured by correlations between the two U.S. benchmarks and seven major Asian market benchmarks, based on daily returns of the futures prices at Asian end of day. • Flexibility: As indicated by contract size and trading hours of the futures on the two U.S.
    [Show full text]