Hello,
I'm a student and I'm trying to understand some features of futures contracts.
However, I just discovered the existence of "tick size", "Daily Price Limit", "Underlying Price Scan Range" and I'm a bit confused. Hence, I'm asking for some enlightenment from professionals. I'm writing my reasoning (which might be wrong), could you tell me if I'm right ? Note that I intentionally leave aside the transaction costs in order to ease the calculations.
If we check the "CharacteristcsMBF.png" doc, we see that 1 contract represents 50 Tons. The tick size is 12,5⬠for the 50 Tons.
http://imgur.com/m35Fhh9
http://imgur.com/DOqjqeg
Now, if we check "MaltingBarleyFutures.png" doc. I want (for instance) to buy MAY 13 futures.
I want 2 contracts. I'm happy because 20 contracts are available ! (in Ask Size) So I can buy my 2 contracts which value is under the Ask Column, so 241,00â¬.
It means that I have to pay 2(contracts) * 241â¬(price) * 50 (because that price is for 1 Unit) = 24.100,00 ⬠, right ?
I'm pretty sure that my reasoning above is just but can you please confirm? However, the below reasoning might be wrong.
For the margins:
The Settlement Price is used to assess the margins. it's value is 243,75â¬/unit. (*50â¬/contract)
Do I use the "open" value to assess the difference ? Or is that settlement value for today used in valuating tomorrow's margin?
I mean, if today settlement value is 243,75 and tomorrow it's 243,95, then my accounts at the Clearing House will be increased (or decreased?) ? (I'm Buying)
And the variation will be equal to ? change of .20 so, 20 ticks. ==> 20* 12,5â¬(tick size) ? = 250,00⬠?
http://imgur.com/y8R6UUa
If you now check the "MarginsMBF.png", we know that each contract needs an Initial Margin(IM) of 1.250,00â¬
The UPSR represents the "Underlying Price Scan Range" and is the maximum price movement reasonable likely to occur for the underlying (in 1 trading day?) Basically, does it give the IM value ? 25 (UPSR)* 50 (unit/tons) = 1.250,00 ? (if we had a contract on 60 tons then we should've had an IM of 25*60=1.500,00⬠??)
However, the IM won't be depleted in 1 day because there is a cap on the max. changes. We have a daily price limit of 20. This blocks the daily variation in margins to 20*50 = 1.000,00⬠? If we had 15 instead, this would block the variations to max. 750,00⬠?? it also means that our daily gains are capped at 750⬠max./day/contract?
Our 250,00â¬(1 contract) gains will be added to our security layer at the CCP.
Assuming I make a loss of 500â¬/contract, and that the security threshold is set at 1.000,00â¬, then I have to give the CCP 250,00⬠to remain at the good level ? (1.250 IM - 500 = 750 in CCP accounts and I need 1.000,00 So I give 250,00)
Could you tell me if I'm right or wrong in the reasoning ?
Thank you very, very much !
Yours Faithfully,
I'm a student and I'm trying to understand some features of futures contracts.
However, I just discovered the existence of "tick size", "Daily Price Limit", "Underlying Price Scan Range" and I'm a bit confused. Hence, I'm asking for some enlightenment from professionals. I'm writing my reasoning (which might be wrong), could you tell me if I'm right ? Note that I intentionally leave aside the transaction costs in order to ease the calculations.
If we check the "CharacteristcsMBF.png" doc, we see that 1 contract represents 50 Tons. The tick size is 12,5⬠for the 50 Tons.
http://imgur.com/m35Fhh9
http://imgur.com/DOqjqeg
Now, if we check "MaltingBarleyFutures.png" doc. I want (for instance) to buy MAY 13 futures.
I want 2 contracts. I'm happy because 20 contracts are available ! (in Ask Size) So I can buy my 2 contracts which value is under the Ask Column, so 241,00â¬.
It means that I have to pay 2(contracts) * 241â¬(price) * 50 (because that price is for 1 Unit) = 24.100,00 ⬠, right ?
I'm pretty sure that my reasoning above is just but can you please confirm? However, the below reasoning might be wrong.
For the margins:
The Settlement Price is used to assess the margins. it's value is 243,75â¬/unit. (*50â¬/contract)
Do I use the "open" value to assess the difference ? Or is that settlement value for today used in valuating tomorrow's margin?
I mean, if today settlement value is 243,75 and tomorrow it's 243,95, then my accounts at the Clearing House will be increased (or decreased?) ? (I'm Buying)
And the variation will be equal to ? change of .20 so, 20 ticks. ==> 20* 12,5â¬(tick size) ? = 250,00⬠?
http://imgur.com/y8R6UUa
If you now check the "MarginsMBF.png", we know that each contract needs an Initial Margin(IM) of 1.250,00â¬
The UPSR represents the "Underlying Price Scan Range" and is the maximum price movement reasonable likely to occur for the underlying (in 1 trading day?) Basically, does it give the IM value ? 25 (UPSR)* 50 (unit/tons) = 1.250,00 ? (if we had a contract on 60 tons then we should've had an IM of 25*60=1.500,00⬠??)
However, the IM won't be depleted in 1 day because there is a cap on the max. changes. We have a daily price limit of 20. This blocks the daily variation in margins to 20*50 = 1.000,00⬠? If we had 15 instead, this would block the variations to max. 750,00⬠?? it also means that our daily gains are capped at 750⬠max./day/contract?
Our 250,00â¬(1 contract) gains will be added to our security layer at the CCP.
Assuming I make a loss of 500â¬/contract, and that the security threshold is set at 1.000,00â¬, then I have to give the CCP 250,00⬠to remain at the good level ? (1.250 IM - 500 = 750 in CCP accounts and I need 1.000,00 So I give 250,00)
Could you tell me if I'm right or wrong in the reasoning ?
Thank you very, very much !
Yours Faithfully,
