A futures contract is a public transaction that takes place on an organized futures exchange. The contract is standardized which the exchange sets the terms and conditions, except the price. Since the time when organized futures trading appears to have originated in Japan during the early Tokugawa era around the seventeenth century, financial futures have become so successful that they now constitute the bulk of all futures trading and have become an indispensable tool for financial risk management by companies and fund managers.
This short course will focus on understanding the mechanics of stock index futures and their uses in trading, hedging, and asset management.
Course Objectives
- Understand how futures contracts, especially stock index futures, work
- Understand contract standardization and its importance
- Know the role Clearinghouse plays and the purpose of mark-to-market and price limits
- Learn the essential pricing principles for stock index futures
- Know the various general trading strategies utilizing stock index futures
- Know the various ways fund managers could make use of stock index futures
Course Outline
Module 1: Introduction to Futures Contract
- History of Futures Trading
Module 2: Contract Standardization
- Expiration Dates
- Contract Value
- Trading Hours
- Contract Standardization Promotes Liquidity
Module 3: Clearinghouse, Margins, and Price Limits
- Futures Margins
- Mark-to-Market
- Settlement Price
- Price Limits
- Offsetting Futures Positions
- Cash Settlement
- Special Quotation
Module 4: Pricing Stock Index Futures
- Basis
- Basis Convergence
- Cash-Futures Arbitrage
Module 5: Trading Stock Index Futures
- Outright Futures Trading
- Rolling Positions
- Spread Trading
Module 6: Fund Management Applications of Stock Index Futures
- Beta Adjustment
- Cash Equitization
- Creating Equity Out of Cash
- 130-30 Strategies
- Portable Alpha Strategies