Every day Dow Futures begin trading on Chicago Board of Trade (CBOT) at exactly 8:20 AM EST. New York Stock Exchange (NYSE) opens at 9:30 AM EST. This one hour and ten minutes of Dow futures trading before the trading of stocks at NYSE usually provides financial managers, professional traders and financial reporters good idea of the market sentiment for the day. Dow Futures began trading at CBOT in 1997.
Just multiply the value of the Dow Jones Industrial Average (DJIA) with $10 in order to find the market value of the Dow Futures. For example, suppose the DJIA is at 8500 points, a single Dow Futures contract will have a value of ($10)(8500)= $85,000. In other words, the value of the Dow Futures contract increases/decreases by $10 for every point increase/decrease in the DJIA.
Spreading and arbitrage are two primary strategies available to futures traders. Spreading is one futures trading strategy that nearly all index futures traders can take advantage of. Futures traders can use the in build leverage of 10 in the case of Dow Futures in their benefit by going long or short in anticipation of a major move in DJIA. So if a futures trader believes that the NY stock market is going to rally huge, he can take long position in Dow Futures and make a huge profit in case his optimism turns out to be true. Similarly if he/she believes the market will go down, he/she can go short on Dow Futures and make profit from the bears.
The CBOT began trading a mini sized Dow Futures contract values at $5 times the average on its electronic platform in April 2002. Although the mini sized Dow futures contract hasnt matched the popularity of the CME E-min stock index contract like the E-mini S&P 500 Futures contract, it has grown quickly in popularity.
DJIA accounts for about 20% of the market value of all US equities. The Dow Index was first published in 1896. Dow Jones Industrial Average (DJIA) is an index of 30 large capitalizations, blue chip stocks traded on the New York Stock Exchange (NYSE).
Movement in the DJIA is sensitive to the news surrounding the 30 companies represented in the index particularly that with the highest prices as Dow is a price weighted index. Today DJIA is the most widely quoted market indicator in newspapers, radio, television and electronic media around the world.
Stock index futures are futures contracts based on indexes that are composed of stocks. Most countries with a vibrant stock market also have a futures contract on a stock index that represents that economy. Its not surprising that some of the most popular futures contracts are related to equity markets.
Currently more than 70 stock-index futures contracts are traded on at least 20 exchanges around the world. Stock-index futures are an integral part of the stock markets daily activity.
For example in United States, futures contracts are available on the Dow Jones Industrial Average as well as the broader Standard & Poor (S&P) 500 Index and the technology oriented NASDAQ-100 index.
Similarly Hong Kong has Hang Seng Futures Contract on its famous Hang Seng Stock Index, France has CAC 40 futures contract on its CAC-40 stock index and United Kingdom (UK) has FTSE-100 futures contract on its famous FTSE-100 stock index, and Dow Jones Euro STOXX 50 covers selected stocks in the euro economy.
Just multiply the value of the Dow Jones Industrial Average (DJIA) with $10 in order to find the market value of the Dow Futures. For example, suppose the DJIA is at 8500 points, a single Dow Futures contract will have a value of ($10)(8500)= $85,000. In other words, the value of the Dow Futures contract increases/decreases by $10 for every point increase/decrease in the DJIA.
Spreading and arbitrage are two primary strategies available to futures traders. Spreading is one futures trading strategy that nearly all index futures traders can take advantage of. Futures traders can use the in build leverage of 10 in the case of Dow Futures in their benefit by going long or short in anticipation of a major move in DJIA. So if a futures trader believes that the NY stock market is going to rally huge, he can take long position in Dow Futures and make a huge profit in case his optimism turns out to be true. Similarly if he/she believes the market will go down, he/she can go short on Dow Futures and make profit from the bears.
The CBOT began trading a mini sized Dow Futures contract values at $5 times the average on its electronic platform in April 2002. Although the mini sized Dow futures contract hasnt matched the popularity of the CME E-min stock index contract like the E-mini S&P 500 Futures contract, it has grown quickly in popularity.
DJIA accounts for about 20% of the market value of all US equities. The Dow Index was first published in 1896. Dow Jones Industrial Average (DJIA) is an index of 30 large capitalizations, blue chip stocks traded on the New York Stock Exchange (NYSE).
Movement in the DJIA is sensitive to the news surrounding the 30 companies represented in the index particularly that with the highest prices as Dow is a price weighted index. Today DJIA is the most widely quoted market indicator in newspapers, radio, television and electronic media around the world.
Stock index futures are futures contracts based on indexes that are composed of stocks. Most countries with a vibrant stock market also have a futures contract on a stock index that represents that economy. Its not surprising that some of the most popular futures contracts are related to equity markets.
Currently more than 70 stock-index futures contracts are traded on at least 20 exchanges around the world. Stock-index futures are an integral part of the stock markets daily activity.
For example in United States, futures contracts are available on the Dow Jones Industrial Average as well as the broader Standard & Poor (S&P) 500 Index and the technology oriented NASDAQ-100 index.
Similarly Hong Kong has Hang Seng Futures Contract on its famous Hang Seng Stock Index, France has CAC 40 futures contract on its CAC-40 stock index and United Kingdom (UK) has FTSE-100 futures contract on its famous FTSE-100 stock index, and Dow Jones Euro STOXX 50 covers selected stocks in the euro economy.
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Trade Dow Futures. Learn Swing Trading!
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