If you want my $$$ Answer my questions on futures:

Discussion in 'Index Futures' started by bvam1, Jan 20, 2003.

  1. bvam1


    I've been trading the QQQ for a while now, and I am interested in moving to the NQ or ES. Could you answers some of the questions below so that I can get started trading futures with you guys?

    1) The NQ follows the Nasdaq index and the ES follows the S&P index, right?

    2) Futures have strike just like options right? If the Nasdaq is now at 1350, I can buy/sell the NQ at different strikes, say, 1200, 1250, or 1500. Is this correct?

    3) Is there such a thing as time premium for futures? Say if the Nasdaq is at 1500 and I want to buy the NQ at strike 1400, the price would be at least 100 X 20, right?

    4) Similar to question 3, if Nasdaq is trading at 1500, if I want to buy NQ at strike 1600, how much would it cost? What about strike 1700?

    5) What determines the price of futures at various strikes.
  2. cheeks


    You are confusing futures with options. I'm sorry I do not have more time to explain. Go to http://www.cme.com/ and take their online tutorial on e-minis. That will get you started.
  3. Options have strike prices, the ES and NQ futures have no strike price, just an expiration date. ES is almost the same as 500 shares of SPY, and NQ is almost the same as 800 shares of QQQ. The only difference on the level you were asking your questions is that ES and NQ have expiration dates, which means you will "automatically get out of your position" around the end of the quarter.
  4. Contact the New York Institute of Finance. Purchase a book entitled, "Futures: A Personal Seminal."
  5. bvam -

    1. The NQ tracks the Nasdaq-100 index, not the Nasdaq Composite.

    2. Futures do NOT have strikes. They trade only at whatever their price is at the moment - just as the SPY or QQQ trade at their price relative to the index.

    3. Futures are not options - they don't have a "time premium" as you're thinking of it. They do have a "cost to carry" premium which is the cost of carrying the underlying stocks that compose the index, but with interest rates so low it's a fairly small amount right now.

    4. Again - futures are NOT options. They do NOT have strikes. They trade at whatever their price is at the moment. There are however options on the futures, but that gets into a whole issue of a derivative of a derivative.

    5. Finally - in case it wasn't clear, futures are NOT options. They do NOT have strikes.

    As someone suggested earlier - do a lot more reading on the subject before considering trying to trade them. There's enough risk in trading without trying to trade something that you don't even understand the basics of.

    Good luck.
  6. Trade the ES and NQ as if it were the Q's. 1 ES point = $50. 1 NQ point = $20. The average daily range of the NQ is something like 35 points, that of the ES is about 24 points.

    That you were considering strikes suggests you hold the Q's longer than intraday. As such, be prepared for significant opening gaps from day to day. Of course if you are trading 800-1000 Q's or better then you are used to some opening volatility.

    The Q's are to the ES what the tortoise is to the hare.
  7. nitro


    ??? Limit down on the ES and NQ is 40 points! ???

    From the CME: http://www.cme.com/products/index/products_index_pricelimitguide.cfm

    "Down only. Once a limit offer has been established, trading can occur at or above this limit for 102 minutes or until 2:30 p.m. CT.3 Trading will halt for two minutes if the primary futures contract is limit offer at the end of the 102 minutes or at 2:30 p.m. CT3. Trading will resume with the 10% limit in effect."

    nitro :confused:
  8. The average daily range of ES is much less now, about 15 pts.
    It used to be bigger a few months ago.
  9. bvam1


    I read the tutorial at www.cme.com. It's too basic and it doesn't answer many of my questions.

    So you're telling me, right after I've purchased a future contact it costs me virtually nothing? (not including commission, fees, etc)
    Then, the amount that I'll make or lose depending on the movement of the Nasdaq I00 index, right? Oh, and where can I keep track of the movement of the Nasdaq 100 and the S&P 500 index? (real time now)

    Thanks guys, things are getting a little clearer now. Hopefully, I'll be able to trade futures soon. Don't you just love it when a newbie like me come and hand you money on a silver plate? Keep helping me and tell me more so i'll be encouraged to trade. :)
  10. rgowka1


    Futures do trade at a premium/discount (yes, they do trade at a discount) .

    There are "arbitrage bounds" which are calculated based on transaction costs,interest rates and bid-ask spreads etc...

    But since, futures - spot market is efficient (I am not saying that spot market is efficient) , futures always trade at a premium/discount.

    So just donot be suprised to see a difference between SPX and ES...

    For a more pedagogical explanation , read "Options, Futures, and Other Derivatives (5th Edition)
    by John C. Hull"
    #10     Jan 21, 2003