Wow Rally

Index shoot up to 1477 with 20+ points premium to cash, some investors must be pretty bullish or short covering. I really not sure but if one can ride on it. How wonderful it is for that short moment. It's retreating and watching again.

I picked up the fixed bikes and my kiddos are really happy about them and they ride happily along the road with no sign of tiring, like the old gone days. Do you have one before?

Hot afternoon

It is pretty hot outside and I am driving around to look for someone to fix my kiddo bikes. Everything is so nice and people are smiling to each other in a friendly way.

It is a Saturday afternoon when most people are having a relax mode.

I really enjoy this moment and hope it will continue as it is. Life is full of surprises and this hotty afternoon also come as surprise, like that sweet twenty who went pass by.

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Nikkei 225  

Oct
Daily reference point on FKLI - 20/10/11(Th)
R2= 1475
R1= 1466
S1= 1450
S2= 1443
Br
Daily reference point on FKLI - 10/10/11(M)
R2= 1398
R1= 1381
S1= 1366
S2= 1351

17-June-2011 (Fri)

25 May 2011

HAPPY CNY 2011

祝福您兔年農曆新年快樂，恭喜您一帆風順，二龍騰飛，三羊開泰，四季平安，五福臨門，六六大順，七星高照，八方來財，九九同心，十全十美，百事可樂，千事吉祥，萬事如意，心想億成﹗

Index Futures with Bursa Malaysia Derivatives Berhad/Malaysia Derivative Exchange(MDEX)

I.      Definition
         FUTURE CONTRACT IS AN AGREEMENT TO BUY OR SELL A SPECIFIED QUANTITY OF AN UNDERLYING ASSET AT A SPECIFIED PRICE DETERMINED TODAY AND TO BE DELIVERED AT A SPECIFIED TIME AND PLACE IN SOME FIXED FUTURE DATE.

On FKLI Contract Specifications/Features:

1. One(1) index point is equivalent to RM50-00.

2. Every tick is at half(0.5) point, up or down. Investor can long(bullish outlook) or short(bearish outlook) the index, depending on investors expectation of the market trend and the investor will gain if he/she is in the right trend with the market and hence otherwise. 

3. Trading Months: Spot month(current month), Next Month, 3rd month and 6th month into the future with higher volume and volatility in spot and next month. Investors can trade on short term, mid term and long term depending on the investors' own preference.

4. Initial Margin: RM3000-00 per contract

Maintenance Margin: RM2500 per contract (when reached will subject to margin call and top up to and greater than initial margin is required).

Margins are subject to change from time to time.

Clients normally are advised to deposit more than required when volatility is considered.

5. Mark to Market on daily basis(unrealized profit/loss are computed on the daily basis).

6. Last trading day of the contract is last trading day of MDEX of the contract relative month. However, investors can liquidate the position any time where applicable to his/her investment objective(s) after the contract is entered. If the investor do not liquidate the position when expire, the system will liquidate the contract upon expiry and the nett proceed will be credited/debited from client's account accordingly.

7. FKLI is a highly volatile investment and hence the associated risk nature is high.

8. Clients will be able to receive e statement on the trading done at the end of the trading day if they apply one when open the account.

9. Note that the cash market and spot month future contract may/may not be moving in parallel but they mill merge at the expiry.

II.     Trading on index futures.

For example,

Joan has a MYR100,000 which is a gift from her parents and is now looking for investment opportunity in the future market.

So she approaches a future broker representative (FBR) to open a trading a/c. Upon successful registration, she pledge the amount into her trading account.

On a day, she anticipated the market will go up and hence she long five(5) spot month future contract at 1350 points. At 1045am, the index went up to 1355 and she decided to take profit.

Profit = (Exit level – Enter level) x Rate per index point x number of contract.

            So, the profit is

                      = (1355 -1350) x MYR50 x 5

                      = 5 x MYR50 x 5

                      = MYR1,250*

·         *this computation is calculated without considering transaction cost. In normal case, the transaction cost is MYR25 per contract per entry, meaning to say MYR50 per round trip(entry and exist on per contract basis)

So, after considering the cost, the return is MYR1250 – MYR250

                                                                 =  MYR1000.

Now, one of the beauty of the future market instruments is that it allows investor not only to long(buy and anticipate the market to go up to gain) but also enable the investor to short ( buy and anticipate the market to go down to gain) the index/market.

            Conversely, the profit on shorting the index is as follow:

On a day, she anticipated the market will go down and hence she short five(5) spot month future contract at 1340 points. At 1100am, the index really went down to 1333 and she decided to take profit, i.e. to liquidate the position.

Profit = - (Exit level – Enter level) x Rate per index point x number of contract.

            So, the profit is

                      = (1340 -1333) x MYR50 x 5

                      = 7 x MYR50 x 5

                      = MYR1750*

·         *this computation is calculated without considering transaction cost. In normal case, the transaction cost is MYR25 per contract per entry, meaning to say MYR50 per round trip(entry and exist on per contract basis)

So, after considering the cost, the return is MYR1750 – MYR250

                                                                 =  MYR1500.

Note from the above examples, the break even point is always the value of one index point per contract, i.e. MYR50. Thus, the more the number of contracts, the more is the charges, but it is always MYR50 x number of contract. This applies for both long and short positions. However, the commission rates is always negotiable subject to volume of transactions.

Before I proceed further, I would like to introduce different contracting months for the Malaysia index futures, namely

1.      spot month, i.e. Current month

2.      next month

3.      third month from current month

4.      6^th month from current month

For expiring period is always the last trading day of the contracting month. At this date, the investor must liquidate their positions expiring on this month or else the position will be offset by the system at the end of last trading day. However, those positions which are not current month’s contract will remain alive till the next expiring period.

Hence investors can choose their own investment horizon according to their own taste and investment preference.



To ALL Potential Investors,

If you are keen to open a trading account to trade on financial derivatives (such as FKLI/FCPO)  on Malaysian Derivatives Exchange(MDEX), kindly contact me(click it) 

Calvin 

E: caltin66@gmail.com
Regards.