Definition: Contract specification will spell out the standard elements of a futures contract.
For FKLI's contract specification:-
For FCPO's contract specification:-
2) Common used term
No
|
Trading Terminology
|
Common Terms
|
1
|
Long
|
Buy
|
2
|
Short
|
Sell
|
3
|
Margin
|
Deposit
|
4
|
Margin Call
|
Shortage of deposit
|
5
|
Mark-to-market
|
A process that require investor to deposit further fund into their trading account if their account dropped below certain value.
|
6
|
Cash settlement
|
All contracts upon expiry will be close-out at a cash price without delivery of physical good need to set in.
|
7
|
Physical delivery
|
Investors bounce to deliver the underlying commodity.
|
3) Leverage
Definition: Leverage is being defined as the ability to make large profits from small initial outlays of capital.
4) Volume
Definition: Contract that being traded.
5) Open Interest
Definition: Contract that not yet being closed.
6) Profit and losses calculation
7) Order type – Limit Order
Definition: Order to be filled at a certain price specified or better.
8) Trading States
No
|
Market States
|
Actions/ Activities
|
Duration
|
Notes
|
1
|
Pre-Open
|
New Order Entry, Modifies, Cancels
|
30 Minutes
|
No Market Order is allowed.
|
2
|
No Cancel
|
New Order Entry
|
30 Seconds
|
No modifies or cancels
|
3
|
Trading
|
Continuous Matching
|
Varies by Product
|
-
|
4
|
Intraday Pause
|
Cancel Only
|
Varies by Product
|
-
|
5
|
Intraday Pre-Open
|
New Order Entry, Modifies, Cancels
|
30 Minutes
|
No Market Order is allowed.
|
6
|
No Cancel
|
New Order Entry
|
30 seconds
|
No Modifies and Cancels
|
7
|
Trading
|
All Functions
|
Varies by Product
| |
8
|
End Day Close & Surveillance Period
|
Order Cancellation
|
15 Minutes
|
Cancel of orders.
|
9) Trading Hours
No
|
Market State
|
FKLI
|
FCPO
|
1
|
Pre-Open
|
08:15:00
|
10:00:00
|
2
|
No Cancel
|
08:44:30
|
10:29:30
|
3
|
Trading
|
08:45:00
|
10:30:00
|
4
|
Intraday Pause
|
12:45:00
|
12:30:00
|
5
|
Intraday Pre-Open
|
14:00:00
|
14:30:00
|
6
|
No Cancel
|
14:29:30
|
14:59:30
|
7
|
Trading
|
14:30:00
|
15:00:00
|
8
|
End Day Close
|
17:15:00
|
18:00:00
|
9
|
Surveillance
|
17:30:00
|
18:15:00
|
Level 2:
1) How to calculate final settlement price
Definition: The Final Settlement Value shall be the average value, rounded to the nearest 0.5 of an index point (values of 0.25 or 0.75 and above being rounded upwards) of the KLCI for the last half hour of trading on the Exchange on the Final Trading Day excepting the highest and lowest value.
2) What is Rollover
Definition: Rollover means extending the current position by closing the near contract month to another far contract month.
3) What is Spread
Definition: Spread is simultaneously buying and selling another contract in different contract month.
4) Other order types – Market Order, Stop Loss, Stop Limit
Order Type
|
Definition
| |
1
|
Market
|
Order will be filled immediately once sent.
|
2
|
Stop Loss
|
· Can be used as a strategy to cut loss.
· Can be used as a level to take profit.
· Can be used as a level to initiate fresh position.
|
3
|
Stop Limit
|
The usage is same as the STOP order, however, it protects investors towards very illiquid market by specifying the worst level that investors will want to accept.
|
5) Users of futures
A) Speculator
A pure view of buying futures if the market is bullish and sell futures if the market is expected to be bearish.
B) Arbitrageur
When the futures and physical market prices have huge anomalies or differences, investors will take the opportunity to arbitrage between the two markets to obtain ‘riskless’ profits.
C) Hedger
Insurance companies or fund managers with a portfolio of stocks can short the FKLI to protect against a decline in portfolio value caused by a falling stock market.
6) How to hedge against your stock portfolio?
Formula as per below:-
Stock Portfolio’s Value
FKLI Price x RM50
Using the above formula will determine the number of futures contract needed to be used to hedge the stock portfolio.
