Futures FAQs

Futures FAQs

What is the S&P 500® Index?

The S&P 500 Index is one benchmark by which the US stock market's performance can be measured. The S&P 500 Index is based on the stock prices of 500 large-capitalization companies and represents a broad cross-section of the US equity market. The Index values are exclusive of dividend income, and reflect only price action of the underlying stocks. Since the Index is capitalization weighted (shares outstanding x stock price), each company's influence on Index performance is directly proportional to its market value.

Generally, an investor who expects the stock market to rise might buy E-Mini S&P 500 Futures Contracts instead of purchasing individual stocks. The investor could profit if the market rises and lose if it declines. Conversely, an investor who expects the market to decline might buy E-Mini S&P 500 Put Options, and profit if the market declines, or lose if it rises.

The price of the E-Mini S&P 500 Futures and Options Contracts closely tracks the level of the S&P 500 index. However, prices may be higher or lower because factors impact the price of futures, options and the cash price of the underlying 500 stocks in the S&P 500 index. Examples of such factors include the facts that the owner of the underlying stock receives dividends on stocks, while the owner of E-Mini S&P Futures and Options Contracts does not; and the buyer of the underlying stocks pays cash or borrows to pay for the stock, while the buyer of the E-Mini Futures deposits margin. The difference between the cash price and the futures price is called the cost of carry. Factors which affect the value of options include their time value, which has several components such as the amount of time remaining until expiration, and volatility.

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What is the E-Mini^TM S&P 500® Futures Contract?

A futures contract is an agreement to buy or sell a specified quantity of a commodity at a specified price and at a specified date in the future. E-Mini S&P 500 Futures Contracts are legally binding agreements to buy or sell the cash value of the S&P 500 Index at a specific future date. The symbol is: "ES", and the contract trades on the Chicago Mercantile Exchange's GLOBEX® 2 System. The GLOBEX 2 System is a small-order (30 contracts or less) electronic order routing and execution system which allows quick trade execution virtually 24 hours a day. The contracts are valued at $50 x the futures price. For example, if the E-Mini price is at 920.00, the value of the contract is $46,000 ($50 x 920.00). The E-Mini Futures Contract months are March, June, September and December. The settlement date for each quarterly futures contract month is the third Friday of that contract month.

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What is the E-Mini^TM S&P 500® Options Contract?

An option on a futures contract conveys the right, not the obligation, to assume a position in the underlying futures market at a specific price any time before the option expires. A call option on a futures contract is the right to buy a futures contract. A put option is the right to sell a futures contract. The symbol is "ES" followed by expiration month and year and strike price, for example ES OCT98 1170. The underlying instrument for each E-Mini S&P 500 Options Contract is one E-Mini S&P 500 Futures Contract. The dollar value of an option contract is $50 x the premium, or price, of the option. For example, if the September 925.00 call has a premium of 7.00, the dollar value of the E-Mini S&P 500 Option would be $350 ($50 x 7.00). Strike, or exercise, prices for E-Mini S&P 500 Options are in 5-point increments (e.g., 915.00, 920.00, 925.00) for the two nearby contracts, and in 10-point increments (e.g., 910.00, 920.00, 930.00) for the deferred months.

There are twelve E-Mini Option Contract Months. The E-Mini S&P 500 quarterly cycle options settle in cash during a Special Opening Quotation on the morning of the third Friday of the contract month. Non-quarterly, or serial, options (i.e., Jan, Feb, Apr, etc.) stop trading at 3:15 (US CST) on the third Friday of the contract month and settle into the nearest futures contract.

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What is the S&P / ASX 200® Index?

The S&P/ASX 200 is recognized as the primary investable benchmark in Australia. The index covers approximately 78% of Australian equity market capitalization. Index constituents are drawn from eligible companies listed on the Australian Stock Exchange. This index is designed to address investment managers' needs to benchmark against a portfolio characterized by sufficient size and liquidity.   The S&P/ASX 200 is comprised of the S&P/ASX 100 plus an additional 100 stocks. It forms the basis for the S&P/ASX 200 Index Future and Options and the SPDR S&P/ASX 200 Exchange Traded Fund (ETF).

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What is the ASX SPI 200® Futures Contract?

 

ASX SPI 200 Index Futures (also known as SPI Futures) is the benchmark derivative product for investors trading and hedging in the Australian equity index market. SPI Futures enable investors to trade movements in the S&P/ASX 200 Index in a single transaction, allowing exposure to Australia’s top 200 companies without having to buy or sell shares in every company in the index. SPI Futures are approved for trading by the US Commodities Futures Trading Commission (CFTC) and the UK Financial Services Authority (FSA).  Volumes in the SPI Futures contract have grown significantly in recent years.  See the ASX/SFE website for further details and Contract Specifications.

 

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What is the SMI® Index?

The SMI® Index is a capital-weighted, non-dividend-adjusted index featuring up to 25 liquid large-cap stocks (blue chips) traded on the Swiss equity market, representing about 80% of the total capitalization. The index was first calculated on June 1998, at a level of 1500. The capital factor (k) was determined such that the product of total capitalization and k factor resulted in an index figure of 1500 points. The market capitalization is calculated on the basis of the number of stocks in circulation. The SMI® Index is calculated real-time. As soon as a trade is concluded in one or more SMI® stocks, the index is recalculated. The index level is published every second via Swiss Market Feed (SMF) if a new trade is concluded. Only those prices negotiated for trades concluded on-exchange (i.e., on the Swiss Exchange) are factored into the index calculation. As trading in SOFFEX products such as stock options and futures is conducted solely on the basis of SMI® securities, this index has significant importance for professional market operators.

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What is the SMI® Futures Contract?

SMI® Futures Contracts are legally binding agreements to buy or sell the cash value of the SMI® Index at a specific future date. The symbol is: "SMI", and the contract trades on the Eurex. Eurex is a jointly owned subsidiary of Deutsche Borse AG and the SOFFEX, each of which holds a 50 percent stake in the company. As the hub of a forward-looking electronic futures market, Eurex is open to other exchanges. The subsidiary Eurex Clearing AG offers participants fully integrated and automated clearing facilities for all products and offers an electronic order routing and execution system which allows quick trade execution between the hours of 8:30 a.m. until 5:00 p.m. Switzerland time (CET). The contracts are valued at CHF 10 per SMI Index Point. For example, if the SMI price is at 1000.00, the value of the contract is CHF 10,000 (CHF 10 x 1,000). The SMI Contract months are March, June, September and December. The settlement date for each contract month is the third Friday of the expiration month, if that is an exchange trading day; otherwise, on the exchange trading day immediately prior to that Friday. Trading in the expiring futures contract stops at 9:00 a.m. CET on the last trading day. See the Eurex website for further details and Contract Specifications.

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What is the SMI® Options Contract?

The symbol for the SMI Options Contract is OSMI [followed by expiration month and year and strike price], for example OSMI DEC98 6200. The underlying instrument for the SMI Options Contract is the Swiss Market Index (SMI®). The dollar value of an SMI option contract is CHF 10 per SMI index point, or price of the option. For example, if the December 6200 call has a premium of CHF 5, the price to be paid for 1 SMI Options Contract would be CHF 50 (CHF 10 x 5). Strike, or exercise, price gradations for SMI Options are as follows: (i) for contract months with a duration of 1 - 9 months, there will be 9 strike prices with an exercise price gradation in 50 index points; (ii) for contract months with a duration of 12 months, there will be 5 strike prices with an exercise price gradation in 100 index points; (iii) for contract months with a duration of more than 12 months, there will be 5 strike prices with an exercise price gradation in 200 index points. The quotation of the SMI Options Contracts is in points, carried out one decimal place. The minimum price movement is dependent upon the option price, as follows:

The SMI Options Contract months are the three nearest calendar months, the three following months within the cycle March, June, September and December, as well as the two following months of the cycle June and December; i.e., options contracts are available with a duration of 1, 2, 3, maximum 6, maximum 9, maximum 12, as well as maximum 18 and maximum 24 months. See the Eurex website for further details and Contract Specifications.

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What is the CAC 40 Stock Index?

The CAC 40 Stock Index (CAC 40), a weighted index of the monthly settlement stock market of the SBF-Bourse de Paris (the Paris Stock Exchange), consists of 40 "blue chip" stocks representing various economic sectors. It has a base value of 1,000 as of December 31, 1987 and is valued at 10 times the futures-quoted index. The CAC 40 Index is managed by an independent committee which changes the index as necessary to reflect changes in the market or in the capital of the index's constituent stocks; is reported to two decimal places, is calculated continuously by the SBF-Bourse de Paris, and is disseminated every 30 seconds. If securities representing more than 35% of the capitalization of the CAC 40 Index cannot be quoted temporarily, (either because of a technical incident, or due to a trading halt involving one or more of the issues in the sample), the index is replaced by a trend indicator known as an eclaireur. In this case, the published index value reflects only the variation in prices of the shares that are quoted. Participants should be extremely cautious in extrapolating those variations to the index as a whole, and they are entirely responsTWSle for the underlying assumptions that they make. For more information you can visit the MONEP website.

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What is the CAC 40 Futures Contract?

CAC 40 Futures Contracts are legally binding agreements to buy or sell the cash value of the CAC 40 Index at a specific future date. The symbol is: "FCE". This contract trades on MONEP, solely through the NSC automated system. Orders for continuously quoted options and futures are entered into the NSC system throughout the trading session and matched on a regular basis. They are executed automatically whenever a counterparty is found.

CAC 40 Futures Contracts trade on a continuous basis in the following hours: (i) an evening sub-session from 5:00 p.m. to 10:00 p.m.; (ii) a morning session from 8:00 a.m. to 10:00 a.m.; and (iii) a daytime sub-session from 10:00 a.m. to 5:00 p.m. (all times are Paris time). The contract is denominated in Euros, valued at EUR 10 for each CAC 40 index point; is quoted in points (carried out to one decimal place); and has a minimum price movement of 0.5 index points, representing a value of EUR 5 per contract (0.5 x EUR 10). Each trading unit equals the CAC 40 Index Value x EUR 10; for example, if the CAC 40 futures price is at 4000.0, the value of the contract is EUR 40000 (EUR 10 x 4000.0). The daily price fluctuation of the CAC 40 futures contract is limited to +/- 190 index points relative to the previous day's settlement price; if one of the two nearest futures maturities exceeds this limit, trading is temporarily halted in CAC 40 futures contracts. The circuit breaker will also be activated if a market imbalance leads to the suspension of trading in a sample group of stocks that together represent more than 75% of the capitalization of the CAC 40. Trading in the CAC 40 Futures Contracts takes place on eight open maturities including three spot months, three quarterly maturities of the March, June, September and December cycle, and two half-yearly maturities (March, September cycle). A maturity's last trading day is the last trading day of the delivery month at 4:00 p.m. A new delivery month is created on the first trading day following the closing of the previous delivery month. There is no delivery of shares at expiration; the CAC 40 futures contract is cash-settled. See the MATIF website for further details and Contract Specifications.

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What is the Short-term CAC 40 Options Contract?

The symbol for the Short-term CAC 40 Options Contract is PX1 [followed by expiration month and year and strike price], for example PX1 JUN99 5300. The underlying instrument for the Short-term CAC 40 Options Contract is the CAC 40 Index.

The value of a Short-term CAC 40 Options Contract is EUR 1 per CAC 40 index point, or price of the option. For example, if the June 1999 5300 call has a premium of EUR 20, the price to be paid for 1 PX1 Options Contract would be EUR 20 (EUR 20 x 1). Strike, or exercise, prices are set at standard intervals of 150 index points each. They are different for calls and puts. When a maturity opens gradations for ODAX Options are as follows: (i) for contract months with a duration of 1 - 9 months, there will be 9 strike prices with an exercise price gradation in 50 index points; (ii) for contract months with a duration of 12 months, there will be 5 strike prices with an exercise price gradation in 100 index points; (iii) for contract months with a duration of more than 12 months, there will be 5 strike prices with an exercise price gradation in 200 index points. The quotation of ODAX Options Contracts is in points, carried out one decimal place. The minimum price movement is 0.10 of a point, representing a value of EUR 1. Trading takes place on a continuous basis between 10:00 a.m. and 5:00 p.m. (Paris Time). Quotation of expiring series ceases at 4:00 p.m. (Paris Time) on their expiration day.

The PX1 Options Contract months are the three consecutive nearby months (including the month in progress), and the quarterly maturity months (March, June, September and December cycle) immediately following those three months. Once the outstanding quarterly maturity's remaining life diminishes to three months, a new quarterly maturity is created. Strike prices are set at standard intervals of 25 index points each (e.g., 4100, 4125, etc.). When a maturity opens, call and put series are created for the five strike prices closest to the index value: one "at the money", two "in the money" and two "out of the money".

The daily price fluctuation of the CAC 40 futures contract is limited to +/- 175 index points relative to the previous day's settlement price; if one of the two nearest futures maturities exceeds this limit, trading is temporarily halted in CAC 40 futures contracts and in short-term and long-term CAC 40 options. The circuit breaker will also be activated if a market imbalance leads to the suspension of trading in a sample group of stocks that together represent more than 75% of the capitalization of the CAC 40.

When a PX1 Options Contract is exercised by its holder, a writer is assigned at random. Settlement takes the form of a cash transfer equal to the difference between the PX1 Options Contract strike price and the value of the day's (or the expiration's) settlement index. The daily settlement index is the mean of all index values calculated and disseminated between 4:40 p.m. and 5:00 p.m. (Paris Time) (including the first index value calculated and disseminated after 5:00 p.m. (Paris Time). The expiration settlement index used as a reference for automatic exercise of contracts that are in-the-money at maturity is the mean of all index values calculated and disseminated between 3:40 p.m. And 4:00 p.m. (Paris Time) on the expiration date (including the first index value disseminated after 4:00 p.m.). the daily cutoff for registering exercise instructions is set at 5:45 p.m. (Paris Time). On the expiration day, in-the-money options are automatically exercised, unless contrary instructions are received from the participant. See the MONEP website for further details and Contract Specifications.

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What is the Hang Seng Index (Futures and Options)?

(Text reprinted from HKFE website)

Hang Seng Index (HSI), the benchmark of the Hong Kong stock market, is one of the best known indices in Asia and widely used by fund managers as their performance benchmark. The Hang Seng Index is a market capitalization-weighted index (shares outstanding multiplied by stock price) of the 33 constituent stocks. The influence of each stock on the index's performance is directly proportional to its relative market value. Constituent stocks with higher market capitalization will have greater impact on the index's performance than those with lower market capitalization. The 33 constituent stocks are grouped under Commerce and Industry, Finance, Properties and Utilities sub-indices. These stocks account for about 70% of the total market capitalization of all stocks listed on The Stock Exchange of Hong Kong Ltd. (SEHK). or:
http://www.hkfe.com

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What is the Mini-Hang Seng Index Futures?

(Text reprinted from HKFE website)

To meet the needs of retail investors with an interest in the Hong Kong stock market, the Hong Kong Futures Exchange (HKFE) will introduce a Mini-Hang Seng Index (Mini-HSI) futures contract on 9 October 2000. The compact, Mini-HSI futures contract is based on Hong Kong's benchmark Hang Seng Index (HSI), which is also the underlying index for the larger sized HSI futures contract. The contract multiplier of the Mini-HSI futures contract is HK$10.00 or one-fifth the size of the HSI Futures contract. Hence, the mini contract will be worth HK$175,000.00 if the HSI futures price is at 17,500 level. Same as the HSI futures contract, the settlement method for the mini contract is cash settled. Local retail investors who have less risk capital and lower hedging requirements will find the Mini-HSI futures contract the most appropriate investment tool as well as hedging instrument for managing their market risk.

The Mini-HSI futures contract inherits the advantages of the larger sized HSI futures contract but is tailored for individuals with limited risk capital. Its smaller contract size allows experienced and novice investors alike to participate in the performance of 33 constituent stocks in the index in a graduated scale.

http://www.hkfe.com

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What is the Hang Seng 100® Index?

The Hang Seng 100 Index is one barometer of the performance of the Hong Kong stock market. The Hang Seng 100 Index is based on the stock prices of 100 companies to provide a broader representation of the Hong Kong market as compared to the Hang Seng Index. The Index values are exclusive of dividend income, and reflect only price action of the underlying stocks. Since the Index is capitalization weighted (shares outstanding x stock price), each company's influence on Index performance is directly proportional to its market value.

Generally, an investor who expects the stock market to rise might buy Hang Seng 100 Futures Contracts instead of purchasing individual stocks. The investor could profit if the market rises and lose if it declines. Conversely, an investor who expects the market to decline might sell Hang Seng 100 Futures Contracts, and profit if the market declines, or lose if it rises.

The price of the Hang Seng 100 Futures Contracts Futures and Options Contracts closely tracks the level of the Hang Seng 100 Index. However, prices may be higher or lower because factors impact the price of futures, options and the cash price of the underlying 100 stocks in the Hang Seng 100 Index. Examples of such factors include the facts that the owner of the underlying stock receives dividends on stocks, while the owner Hang Seng 100 Futures and Options Contracts does not; and the buyer of the underlying stocks pays cash or borrows to pay for the stock, while the buyer of the Hang Seng 100 Futures deposits margin. The difference between the cash price and the futures price is called the cost of carry. Factors which affect the value of options include their time value, which has several components such as the amount of time remaining until expiration, and volatility.

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What is the Hang Seng 100® Futures Contract?

Hang Seng 100 Futures Contracts are legally binding agreements to buy or sell the cash value of the Hang Seng 100 Index at a specific future date. The symbol is: "HHIF", and the contract trades on the Hong Kong Future Exchange's (HKFE) Automated Trading System (ATS). The trading method employed by the HKFE is electronic order matching through an automated execution system. Trading is available in two sessions, as follows: 9:45 a.m. - 12:30 p.m. Hong Kong time (the first trading session) and from 2:30 p.m. - 4:15 p.m. Hong Kong time (except on the Last Trading Day, when the second session ends at 4:00 p.m. Hong Kong time). The contracts are valued at HKD 1,000 per index point. For example, if the Hang Seng 100 Futures Contract price is at 90.00, the value of the contract is HKD 90,000 (HKD 1,000 x 90.00). The Hang Seng 100 Futures Contract months are the Spot Month, the next calendar month, and the next two calendar quarterly months (March, June, September and December). The settlement date for each contract month is the first business day after the last trading day; the last trading day is the business day immediately preceding the last business day of that contract month. The execution of Hang Seng 100 Futures Contracts are subject to a HKD 10.00 fee and levy per contract per side in addition to the commissions and fees charged by Trader Workstation. See the HKFE website for further details and Contract Specifications.

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What is the Hang Seng 100® Options Contract?

The symbol for the Hang Seng 100 Options Contract is HHI [followed by the strike price, expiration month and year], for example HHI85A9. The underlying instrument for the Hang Seng 100 Options Contract is the Hang Seng 100 Index.

The value of a Hang Seng 100 Options Contract is HKD 1,000 per Hang Seng Index point, or price of the option. For example, if the January 1999 90 call has a premium of HKD 3.00, the price to be paid for 1 Hang Seng 100 Options Contract would be HKD 3,000 (HKD 1000 x 3). Strike, or exercise, price gradations for Hang Seng 100 Options are set at intervals of one (1) index point with a minimum fluctuation of 0.01 index point (representing HKD 100). Options premiums are quoted in index points up to two (2) decimal places.

The Hang Seng 100 Options Contract months are the Spot Month, the next two (2) calendar months, and the next three (3) calendar quarterly months (March, June, September and December). The Expiry (or expiration) Date for each options contract month is the business day immediately preceding the last business day of the contract month. The final Settlement Day is the business day immediately following the Expiry Day of that contract month. Trading is available in two sessions, as follows: 9:45 a.m. - 12:30 p.m. Hong Kong time (the first trading session) and from 2:30 p.m. - 4:15 p.m. Hong Kong time (except on the Last Trading Day, when the second session ends at 4:00 p.m. Hong Kong time). The execution of Hang Seng 100 Options Contracts is subject to a HKD 10.00 fee and levy per contract per side in addition to the commissions and fees charged by Trader Workstation. In addition, options exercised on the the Expiry Day are subject to an exercise fee of HKD 8.50 per contract

Exercise of Hang Seng 100 Options Contracts is European style, i.e., an option may only be exercised on the Expiry Day and settle in cash based on the Official Settlement Price. The Official Settlement Price for Hang Seng 100 Options Contracts shall be a number down to two decimal places, determined by the HKFE Clearing House, and shall be the average of the values of the Hang Seng 100 taken at five minute intervals during the Expiry Day. See the HKFE website for further details and Contract Specifications.

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What is DAX?

The Deutscher Aktienindex (DAX ) is comprised of 30 German blue chip stocks, quoted in continuous first segment or second segment trading at FWB Frankfurter Wertpapierborse. The criteria for including a stock corporation in the DAX are the volume of trading in its stock within the last 12 months, its market capitalization and the acceptance of the " bernahmekodex" (take over code). The DAX is constructed as a real-time index and is computed and published every 15 seconds using prices from the FWB Frankfurter Wertpapierborse (8.30 a.m. - 5.00 p.m.). Additionally, the DAX is calculated during the Xetra trading hours (8.30 a.m. - 5.15 p.m.). The index is based on Laspeyres' formula which is chained quarterly. All income from dividends and rights issues are reinvested in the index portfolio. The DAX is adjusted by share specific correction factors according to the "operation blanche". The index weighting is adjusted as part of the quarterly chaining procedure. The DAX price index is calculated in addition to DAX once a day based on closing prices from the Frankfurt Stock Exchange: dividends and bonuses are not reinvested. A "Kassa Index" is computed once a day for all share indices as soon as the "Kassa" prices for all shares included in the index are available. These contracts are stated in Euros. For more information you can visit the EUREX website.

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What is the DAX Futures (Round Lot) Contract?

DAX Futures (Round Lot) Contracts are legally binding agreements to buy or sell the cash value of the 30 largest components of DAX Index at a specific future date. The symbol is: "FDAX". This contract trades on EUREX, a fully electronic exchange which allows quick trade execution. You can visit EUREX at http://www.eurexchange.com (all products of the former organizations SOFFEX and DTB are now being traded on the EUREX-network).

The FDAX Futures Contracts are available for trading from 8:25 a.m. until 10:00 p.m. Germany Time (CET). The contract is valued at EUR 25 per DAX index point; are quoted in points (carried out to one decimal place); and the minimum price movement is 0.5 of a point, representing a value of EUR 12,50. For example, if the FDAX futures price is at 5300.0, the value of the contract is EUR 132,500 (EUR 25 x 5300.0). FDAX Futures Contracts are denominated in Euros. The FDAX Futures Contract months are March, June, September and December. The last trading day for each contract month is the third Friday of the expiration month, if that is an exchange trading day; otherwise, it is on the exchange trading day immediately prior to that Friday. Trading in the expiring futures contract ceases at the start of the intra-day trading rotation on the Xetra electronic trading system, as determined by the management of the Frankfurt Stock Exchange. The final settlement price shall be the value of the DAX index, determined on the basis of the collective prices of the shares contained in the DAX index on the last trading day, as reflected in the intra-day trading rotation on Xetra. See the EUREX website for further details and Contract Specifications.

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What is the DAX Options (Round Lot) Contract?

The symbol for the DAX Options (Round Lot) Contract is ODAX [followed by expiration month and year and strike price], for example ODAX MAR99 5300. The underlying instrument for the DAX Options (Round Lot) Contract is the Deutscher Aktienindex (DAX ).

The value of an ODAX Options Contract is EUR 5 per DAX index point, or price of the option. For example, if the March 1999 5300 call has a premium of EUR 20, the price to be paid for 1 ODAX Options Contract would be EUR 100 (EUR 20 x 5). Strike, or exercise, price gradations for ODAX Options are as follows: (i) for contract months with a duration of 1 - 9 months, there will be 9 strike prices with an exercise price gradation in 50 index points; (ii) for contract months with a duration of 12 months, there will be 5 strike prices with an exercise price gradation in 100 index points; (iii) for contract months with a duration of more than 12 months, there will be 5 strike prices with an exercise price gradation in 200 index points. The quotation of ODAX Options Contracts is in points, carried out one decimal place. The minimum price movement is 0.1 of a point, representing a value of EUR 0,50.

The ODAX Options Contract months are the three nearest calendar months, the three following months within the cycle March, June, September and December, as well as the two following months of the cycle June and December; i.e., options contracts are available with a duration of 1, 2, 3, maximum 6, maximum 9, maximum 12, as well as maximum 18 and maximum 24 months.

The final settlement price shall be the value of the DAX index, determined on the basis of the collective prices of the shares contained in the DAX index on the last trading day, as reflected in the intra-day trading rotation on Xetra. See the EUREX website for further details and Contract Specifications.

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What is the FTSE 100 Index?

The Financial Times-Stock Exchange (FTSE) 100 index, which came into use in 1984, tracks the share price movements of the top 100 United Kingdom companies. It is calculated every minute during each trading day (08:30 - 16:30). For more information, visit The London International Financial Futures and Options Exchange (LIFFE) at the LIFFE website, particularly the publication, "Equity & Index Options, an Introduction to equity and index".

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What is the FTSE 100 Index Futures Contract?

FTSE 100 Index Futures Contracts are legally binding agreements to buy or sell the cash value of the 100 largest components of the FTSE 100 Index at a specific future date. The symbol is: "FTSE". On May 10, 1999, this contract will commence trading through the LIFFE CONNECT trading platform, transforming the LIFFE's "Open Outcry" trading floor into a fully electronic exchange which allows quick trade execution by matching orders pursuant to a trade matching algorithm. You can visit LIFFE at http://www.liffe.com.

The FTSE Futures Contracts are available for trading from 08:35 a.m. until 16:30 p.m. London Time (CET). The contract is valued at 10 per FSTE 100 index point; is quoted in index points and the minimum price movement is 0.5 point ( 5.00). For example, if the FTSE futures price is at 6600.0, the value of the contract is 66,000 ( 10 x 6600.0). The FTSE Futures Contract (Delivery) months are March, June, September and December. The Last Trading Day for each contract month is the third Friday of the Delivery month, unless the third Friday is not a business day, in which case the Last Trading Day shall normally be the last business day preceding the third Friday. Trading in the expiring futures contract stops at 10:30 GMT on the Last Trading Day. The cash settlement price shall be based on the Exchange Delivery Settlement Price (EDSP), which is based on the average values of the FTSE 100 Index every 15 seconds inclusively between 10:10 and 10:30 London time on the Last Trading Day. Of the 81 measured values, the highest 12 and lowest 12 will be discarded and the remaining 57 will be used to calculate the EDSP. Where necessary, the calculation will be rounded to the nearest half index point. See the LIFFE website for further details and Contract Specifications.

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What is the FTSE 100 Index Options (European Style Exercise) Contract?

The underlying instrument for the FTSE 100 Index Options (European Style Exercise) Contract is the FTSE 100 Index.

The value of a FTSE 100 Index Options (European Style Exercise) Contract is 10 per FTSE 100 index point, or price of the option. Prices for options on individual stocks are quoted in pence per share. One equity option contract usually represents 1000 share. Thus the price of 1 FTSE Index option is to be multiplied by 10. For example, if the June 1999 FTSE 100 option contract is quoted at a price of 30, the option will cost 300 per contract (30 x 10). Strike, or exercise, price intervals for 1999 FTSE 100 options is determined by the time to maturity of a particular expiry month and is either 50 or 100 index points. The Expiry months are: (i) March, June, September and December, plus (ii) such additional months that the 3 nearest calendar months are always available for trading. The quotation of FTSE 100 Options Contracts is in index points, carried out one decimal place. The minimum price movement is 0.5 of a point, representing a value of 5.00.

The final settlement price, or Contract Standard is the cash settlement price and shall be based on the Exchange Delivery Settlement Price (EDSP), which is based on the average values of the FTSE 100 Index every 15 seconds inclusively between 10:10 and 10:30 London time on the Last Trading Day. Of the 81 measured values, the highest 12 and lowest 12 will be discarded and the remaining 57 will be used to calculate the EDSP. Where necessary, the calculation will be rounded to the nearest half index point. Exercise of the options is European style, i.e., an option may only be exercised on the Last Trading Day of the expiring options series by 18:00 (London time). The Last Trading Day is the third Friday of the expiry month, unless the third Friday is not a business day, in which case the Last Trading Day shall normally be the last business day preceding the third Friday. Settlement Day is the first business day after the Last Trading Day. See the LIFFE website for further details and Contract Specifications.

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Option Strike Price

The strike or exercise price of an option is the specified price at which the product underlying the option can be bought or sold if the buyer exercises the right to buy (in the case of a call) or sell (in the case of a put).

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Option Premium

The option premium is the price at which the option contract trades, i.e. the price of the option, and is paid by the buyer to the writer, or seller, of the option. The full premium, or total amount payable for an option contract equals the unit price x the option contract multiplier. In return, the writer of the call option is obligated to deliver the product underlying the option to an option buyer if the call is exercised, or buy the underlying product if the put is exercised. The writer keeps the premium whether or not the option is exercised.

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Exercising Futures Options

The buyer, or holder, of an option may exercise the option to purchase or sell the underlying product at the option strike price. In the case of the E-Mini S&P 500 option, the underlying is the E-Mini S&P 500 futures contract. For "Long Options Only Accounts", Trader Workstation' Customers may not exercise options, and must close-out positions by offsets. Nevertheless, it is important to understand the exercise process.

For example, if the holder of 1 E-Mini S&P 500 NOV 970 Call Option decided to exercise the option (because the underlying E-Mini S&P 500 Futures Contract was trading at a price of, say, 990.00), the exercise of the option would obligate the writer (the seller of the option to the holder) to deliver 1 E-Mini S&P 500 Futures Contract to the holder at a price of 970.00, resulting in an unrealized profit to the holder of $1,000 ([990.00-970.00] x $50). The profit would be realized if the holder were to actually sell 1 E-Mini S&P 500 Futures Contract to offset the holder's newly created futures position.

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Option Contract Multiplier

The option contract multiplier is used to determine the full premium or total market value of an option contract and also denotes the number of shares of underlying stock deliverable upon exercise of an equity option.

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Price Movements

The minimum price movement of an options or futures contract is called a tick. For example, the tick value of the E-Mini S&P 500 Options and Futures Contract is .25 index points, or $12.50 (.25 x the $50 contract multiplier). This means that if the price of the E-Mini Futures moves one tick, for example, from 920.00 to 920.25, a long (buying) position would earn $12.50; and a short (selling) position would lose $12.50. Price limits, or daily trading limits specify a maximum price range imposed by an exchange for a contract. The price limits for the E-Mini follow the existing S&P 500® Futures Contract circuit breakers so that trading in the E-Mini Options and Futures Contracts is halted when trading in the S&P 500 Futures is halted.

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Margin For Futures

Futures positions are marked-to-market which means the value of the futures position is continuously updated as the market moves. Trader Workstation Customers are required to monitor their positions and are responsTWSle for ensuring that they deposit additional margin in their accounts to prevent their Account Balance from falling below the required maintenance level to avoid possible forced liquidation of positions. Conversely, if there are gains on open positions, a customer may be permitted to withdraw excess variation margin from the account. New positions can be established only if a Customer's account has sufficient funds to meet initial margin requirements for all open positions. Margin requirements are subject to change on notice to Customers.

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Close-Outs

Because the TWS System operates automatically, Customers must monitor their account equity to be sure that there are sufficient funds on deposit to meet margin requirements. If an account does not have sufficient funds to meet margin requirements, Trader Workstation is entitled to close-out the account at once, without providing notice to the Customer. Trader Workstation is also directed but not obligated, to utilize excess margin in one account to meet margin requirements in one or more other accounts of the same customer. Although the TWS System is designed to mark the Customer's position to the market, whether or not the TWS System performs this function adequately at any particular time, it is the Customer's obligation to determine whether additional maintenance margin is or may soon be required to avoid a close-out. Trader Workstation DOES NOT MAKE MARGIN CALLS FOR PURPOSES OF REQUESTING ADDITIONAL CASH/ASSET DEPOSITS; TWS MAY MAKE A MARGIN CALL TO COMPLY WITH VARIOUS REGULATORY REQUIREMENTS AND IS REQUIRED TO ACT IN ACCORDANCE WITH THESE REGULATIONS. TWS HAS NO OBLIGATION TO WARN CUSTOMERS OF IMPENDING CLOSE-OUTS; AND IT SHALL HAVE NO LIABILITY FOR FAILURE TO DO SO. Even if a Customer's account is under margined and a close-out is not performed by Trader Workstation, the Customer remains responsible for any losses in the account.

ZB, ZN, ZF are set to close out starting before the open outcry close on the last day while ZT will use the entire last day to close out.

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An Example of How Margin on Futures Works

The following example demonstrates how margin works. On December 1, 1997, a Customer buys 1 March E-Mini S&P 500 Futures Contract at a price of $900.00.

Trade Date	Futures Price	Account Equity	Comments
12/01	900.00	$5,000	The Customer deposited original margin of $5,000, providing the account with equity, and established a long E-Mini Futures position. If the equity declines 40% below the minimum current margin requirement, a deposit of maintenance margin will be required to avoid a possible close-out.
12/02	890.00	$4,500	The price of the E-Mini Futures Contract declined 10 points so the account equity declined $500 (10 x $50). Since the account is marked-to-market, the Customer should know that additional maintenance margin will be required before the E-Mini declines by more than 30 points. By viewing the Trader Workstation Trading Screen, messages may provide the status of required margin.
12/03	859.00	$2,950	The price of the E-Mini declined 31 points. If the Customer had not deposited additional funds in the account prior to the decline, the account equity would be reduced by $1,550 (31 x $50 ) to $2,950, in which event the account would have been under margined, and the TWS System may attempt to close-out of the position if conditions permit. Trader Workstation would have discretion as to the timing of the close-out and the Customer would be responsTWSle for all losses, whether or not close-out is attempted in a timely fashion. NOTE: The Customer is obligated to maintain a sufficient Account Balance to meet the required maintenance margin level and avoid a possible close-out.
12/03	859.00	$4,500	The equity increased because $1,550 was wired in the account. This deposit avoided a close-out.
12/04	875.00	$5,300	The price of the E-Mini Futures Contract increased 16 points, increasing the equity in the account by $800 (16 x $50).
12/05	905.00	$6,800	The price of the E-Mini again increased 30 points and the Customer now has excess maintenance margin of $1,800 (above the $5,000 original margin requirement). The excess margin can be withdrawn from the account.

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Market Conditions

Under certain market conditions, it may not be possible for Trader Workstation to liquidate a Customer's position at all, or at the then prevailing market price, and the position may continue to lose value in excess of the equity in the account. The customer will be responsTWSle for such losses. Such market conditions include fast markets, illiquid markets, and locked limit markets.

Fast Market: In the event prices are moving rapidly, the exchange may declare a "Fast Market". In this market condition, a broker may not be able to execute a limit order.

Illiquid Market: If there are not enough buyers or sellers in the market, it may be difficult or impossible to execute an order.

Locked Limit Market: A limit move is a price move in either direction equal to the price limit at which the exchange has declared that trading must cease for a period of time at prices beyond the limit move. If a market reaches the limit it is said to be locked limit. The limits are set out in the contract specifications set out on the Retail Products Page. If a contract reaches the limit on the upside, the contract is said to be "limit up". If it reaches the limit on the down side, it is said to be "limit down". The Chicago Mercantile Exchange has determined that if the S&P 500 Index Futures Contract reaches its price limit, then the E-Mini will cease trading.

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Futures Contracts Not Settled in Cash

For futures contracts that are settled by actual physical delivery of the underlying commodity (“physical delivery futures”), customers may not make or receive delivery of the underlying commodity. Certain currency futures are excepted from this rule (see table below).

To avoid deliveries in expiring futures contracts, customers must roll forward or close out positions prior to a “Close-Out Deadline”. The standard Close-Out Deadline for holders of long positions is the end of the fourth (4th) business day prior to the exchange specified ‘First Notice Day’. For holders of short positions, the standard Close-Out Deadline is the end of trading on the fourth (4th) business day prior to the exchange-specified last trade day. Certain contracts use a different time ahead of the Close-Out deadline as specified in the following table.

It is the Customer's responsibility to make itself aware of the "Close-out Deadline". If a customer has not closed out a position in a physical delivery futures contract by the "Close-Out Deadline", TWS may, without additional prior notification, liquidate the customer’s position in the expiring futures contract. Please note that liquidations will not otherwise impact working orders; customers must ensure that open orders to close positions are adjusted for the actual real-time position

Contract	Delivery Permitted	Close-Out Deadline
ZB, ZN, ZF (ECBOT)	No	2 hours before the end of open outcry trading on the First Notice Day (longs) or Last Trading Day (shorts)
ZT (ECBOT)	No	end of business day prior to the First Notice Day (longs) or Last Trading Day (shorts)
EUREXUS futures	No	same rules as for ECBOT equivalent contracts
GBL, GBM, GBS (Eurex)	No	2 hours before the end of trading on the last trading day
GLOBEX currency futures (EUR, GBP, CHF, AUD, CAD, JPY, HKD)	Yes	Not applicable
All other contracts	No	end of the fourth business day prior to the First Notice Day (longs) or Last Trading Day (shorts)

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Cash-Settled Contracts E-Mini S&P 500 Futures Contracts and the E-Mini S&P 500 Options Contracts for the quarterly contract months (Mar, Jun, Sept and Dec) are settled in cash which means that there is no delivery of the individual stocks in the case of the futures contract or in the case of the Option Contract, there is no delivery of the underlying Futures Contract. E-Mini Futures Contracts are settled in cash using a Special Opening Quotation, on the morning of the third Friday of the quarterly contract month. The Special Opening Quotation is based on the opening prices of the underlying component stocks in the S&P 500 Index, or on the last sale price of a stock that does not open for trading on the regularly scheduled day of final settlement. For the serial E-Mini Options Contract months (i.e. Jan, Feb, Apr, etc.), the E-Mini Option settles into the underlying E-Mini S&P 500 Futures Contract.

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Uses of Futures and Options Contracts

The E-Mini S&P 500 Options and Futures Contracts can provide investors with a vehicle to pursue trading strategies based on the movement of the stock market as generally measured by the performance of the S&P 500 Index. Investors use it to:

• Take a position on the broad market measured by the S&P 500 Index.
• Protect or hedge stock portfolios against adverse changes in the stock market.
• Diversify a securities portfolio.
• Establish an approximate price for a future purchase or sale of securities.

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Buying Futures

An investor who expects the stock market to rise can take a bullish position by buying, for example, E-Mini S&P 500 Futures Contracts. Assume that on November 3, 1997 an investor purchased 10 E-Mini Futures Contracts at 900.00. If the stock market rallies and the E-Mini Futures Contract rises to 930.00, the investor can liquidate the 10 contracts and earn a profit of $15,000 (930.00 - 900.00 = 30 x 10 contracts x $50 multiplier per contract). If, on the other hand, the stock market declines and the E-Mini falls to 870.00, the investor would lose $15,000.

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Selling Futures

An investor who expects the stock market to fall can take a bearish position by selling, for example, E-Mini S&P 500 Futures Contracts. If the investor sold 5 E-Mini Contracts at 900.00 and the value of the E-Mini falls to 860.25, the investor can cover the position and buy the contracts back at a profit of $9,937.50 (900.00 - 860.25 = 39.75 x 5 x $50 contract multiplier). If, on the other hand, the E-Mini rises to 950.00, the investor would lose $12,500 [(900-950) x 5 x 50].

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Buying Call Options

An investor who expects the stock market to rise can take a bullish position by buying E-Mini S&P Call Options. For example, assume that an investor purchased 10 E-Mini 1150 Call Options at $7.50. If the stock market rallies and the E-Mini Futures Contract rises to 1200.00 before the Call Options expire, the E-Mini Calls may rise to a price of say 52.50, and the investor can liquidate the 10 E-Mini Calls and earn a profit of $22,500 [10 x (52.50 - 7.50) x $50], less the option premium paid. If, on the other hand, the E-Mini falls to 1100.00 before the Call Options expire, the price of the option may fall to $0.50 and, the investor would lose $3,500 [(10 x $7) x $50].

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Buying Put Options

An investor who expects the stock market to fall can take a bearish position by buying E-Mini S&P Put Options. If the investor bought 5 E-Mini 900.00 Put Options at $5.00, and the E-Mini falls to 860.25, the price of the option may rise to $40.00, and the investor would earn a profit of $8,750 [5 x (40.00 - 5.00) x $50], less the option premium paid. Conversely, if the E-Mini rises to 950.00 the price of the option may fall to $0.50, and the investor would lose $1,125 [5 x ($5.00 - 0.50) x $50], less the option premium.

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Selling Call Options

An investor who expects the stock market to fall can take a bearish position by selling (or "writing") E-Mini Call Options. For example, assume that an investor sold 5 E-Mini 900.00 Call Options at $5.00, he would receive a premium of $1,250 (5 x 5 x $50 per option contract) and, if the E-Mini Futures Contract falls to 860.00, the price of the call will also decline and the investor may profit by buying the call at such lower price. The investor may also speculate that the price of the E-Mini Futures Contract will not rise to the 900.00 strike price, and if the contract expires without reaching this strike price, the investor would profit by the amount of premium ($1,250) he was originally paid. On the other hand, if the E-Mini were to rally above the 900.00 strike price to 940.00, the investor would then be obligated to buy the E-Mini Futures Contract at 940.00, incurring a loss of $8,750 [5 x (940.00 - 900.00) x $50], or $10,000 less the $1,250 premium. The investor's potential loss would be UNLIMITED, since the underlying E-Mini Futures Contract can rise to any value.

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Selling Put Options

An investor who expects the stock market to rise can take a bullish position by selling (or "writing") E-Mini Put Options. If the investor sold 5 E-Mini 900.00 Put Options at $7.00, he would receive a premium of $1,750 (7 x $50 per option contract) and if the E-Mini Futures Contract rises in price to 930.00, the price of the Put will fall in value and the investor may profit by buying the put at a lower price. The investor may also speculate that the price of the E-Mini Futures Contract will not fall below the 900.00 strike price, and if the contract expires without reaching, or falling below, the 900.00 strike price, the investor would profit by the amount of premium ($1,750) he was originally paid. On the other hand, if the E-Mini were to fall below the 900.00 strike price prior to expiration, the investor may incur a loss. For example, suppose the E-Mini Futures Contract rises to 870.00 and the buyer of the put exercises the option written by the investor, the investor would then be obligated to buy the E-Mini Futures Contract at 900.00, incurring a loss of $5,750 [5 x (870.00 - 900.00) x $50], or $7,500, less the $350 premium. As with writing calls, the foregoing example demonstrates that an investor who writes puts has the potential to lose a significant amount of money; in the case of writing puts, the potential loss is measured as the difference between the strike price of the option and zero.

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Limit Orders

Trader Workstation accepts limit orders for trading the E-Mini S&P 500 Options and Futures Contracts by those Customers who utilize the on-line registration services. A Futures Limit Order is an order in which the customer provides the contract month, the number of contracts to be bought or sold and the price. An Option Limit Order is an order which specifies the option series, the price and the number of contracts. If the limit order can be executed, it will be filled at the price specified, or a better price if one is available. A limit order cannot be filled at a price less favorable than the limit order price. If the market does not trade at the limit price or better while the order is pending, the customer will not get a fill. Orders are only valid for the session that they are entered. If the order is not executed by the end of the session it is canceled, and must be entered for the next session if the customer still wishes to make the trade.

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