Electronic futures trading brokers malaysia
Derivatives are instruments whose value depends on some other more basic underlying asset or commodity. It includes a broad class of instruments that include Forwards, Futures, Options and Swaps. Derivatives markets enable corporations and individuals to manage and electronic futures trading brokers malaysia risk and control exposure to adverse price movements associated with holding an underlying asset or commodity. Derivatives markets also provide tremendous opportunities for investors to profit from the price movements in the underlying markets.
A Futures Contract is a legally binding agreement made between two parties to buy or sell a commodity or financial instrument, at an agreed price, on a specified date in the future. The quality and quantity of each contract is standardised, hence, the price at which the contract is established is the only variable and is determined between the buyer and seller at the time when the contract is traded. Futures Contracts are listed on Exchanges and the performance and obligations under the contract are guaranteed by the Exchange's Clearing House.
Futures offer unique profit opportunities in bull or bear markets since players can initiate buy or sell positions. Investors can profit from electronic futures trading brokers malaysia price volatility as a result of global developments that will impact the financial and commodity markets. Futures also allow investors to take advantage of leverage factor by holding a larger investment value with a smaller capital outlay and returns greater than the same value equity investment.
Futures also provides a mechanism for hedging adverse price movements associated with holding an underlying portfolio of electronic futures trading brokers malaysia, financial instrument or commodity. Institutional Players - as fund managers, insurance companies, financial institutional, commodity trading house and refineries are among the most active players in the market.
Futures contract allow them in managing their portfolios and diversification of risks. Hedgers - market participants who use their strategies in derivatives market to minimize their risk exposure in the underlying market. Local Participations and Retail Investors - individual investors or traders who assume risk in return for trading profits. Stock Index futures are derivatives instrument whose value depends on the value of the Underlying Stock Market Index.
Commodity Futures are derivatives instrument whose value depends on the value of the Underlying commodity. It is a physical-settled contract, upon expiry of the contract, the buyer has to take delivery of the physical CPO.
FCPO prices are determined by market supply and demand with Bursa Malaysia Derivatives Berhad providing the marketplace for players to trade. Market orders - These are orders placed for immediate execution at the best available ask or bid price in the market. Generally, market orders are used when the trader wants a trade-done quickly and is not too concern with negotiating for a better price. Limit orders - A limit order stipulates a price limit for the execution of the transaction.
A buy limit order indicates that the futures contract may be purchased only at the price designated or at a lower price. A sell limit order indicates that the futures contract may be sold at the price designated or at a higher price.
Stop order - A stop order may be used to stop loss, to protect profit or to initiate strategies based on stipulated price levels. Whenever the futures trades at or beyond the designated price of a stop order, the stop orders convert into a market order in the electronic trading system.
This conversion is done automatically. A buy-stop order specifies that the order is not to be executed until the market rises to a designated price.
A sell-stop order specifies that electronic futures trading brokers malaysia order is not to be executed until the market price falls to a designated price. Stop Limit Order - It is a buy or sell order that is to be executed at a specified price or better, once the price of the instrument in the market has reached the trigger price that has been specified. Stop limit is best used when an investor wants to enter or exit market at certain specified prices know as Trigger and Limit electronic futures trading brokers malaysia.
Day Order or Good for the Day - The limit or stop order will lapse at the end of the trading day if no particular date has been set for its validity. It is prudent that a record of such orders is kept and monitored on a daily basis. Basis Orders - Also known as spread orders, basis orders electronic futures trading brokers malaysia used for taking a spread position, i.
The trader attempts to make a profit from changes in the differential between the market price of the respective contract months as time goes by. Futures contracts provides leverage through margin where an investor needs only put up a marginal sum of the contract value instead of the full electronic futures trading brokers malaysia of the contract value. This sum of money is often referred to as the Initial Margin. It is a form of good faith deposit which ensures that counter-parties to the transaction can pay the cash electronic futures trading brokers malaysia when the trade is settled.
Margins are required to be deposited with the Futures broker to start trading. A case study on FKLI product margin calculation. Assumptions made on the current margin requirements for FKLI futures contract is:. The purpose of this compilation is to promote a better understanding of the futures market. The definitions are not intended to state or suggest the correct legal significance of any word or phrase.
Ask The price that the market participants are willing to sell. Bid The price that the market participants are willing to pay. Bear Market A market in which prices are declining.
Bull Market Electronic futures trading brokers malaysia market in which prices are rising. Cash Price Market price of the underlying contract. Also called spot price. Final Settlement Final disposition electronic futures trading brokers malaysia open positions on the last trading day of a contract month. Occurs in markets where there is no actual delivery.
Contract Month A specific month in which delivery or cash settlement may take place under the terms of a futures contract. Also called delivery month.
Convergence A term referring to cash and futures prices merging as the futures contract nears expiration, that is, the basis approaches zero. Hedge The purchase or sale of a futures contract as a temporary substitute for a cash market transaction to be made at a later date. It involves having opposite positions in the cash market and futures market at the same time. Hedger A person or firm who uses the futures market to hedge. Leverage The use of a small amount of assets to control a greater amount of assets.
Margin Funds or collaterals that must be deposited by a customer with his broker, by a broker with a clearing member or by a clearing member with the clearing house. The margin helps to ensure the financial integrity of brokers, clearing members and the exchange as a whole. Margin Call A call from a clearing house to a clearing member, or from a brokerage firm to a customer, to bring margin deposits up to a required minimum level.
Mark-to-Market The daily adjustment of margin accounts to reflect profits and losses. Open Interest Total number of futures contracts electronic futures trading brokers malaysia have not yet been offset or fulfilled for delivery. Premium The excess of one futures contract price over the cash market price. Variation Margin Futures positions are revalued daily at the closing price, and variation margin is the payment receipt of losses profits reflected in the customer's account based on the daily revaluation.
The information contained in this site is based on data obtained electronic futures trading brokers malaysia sources believed to be reliable. Accordingly, neither Hong Leong Investment Bank nor any of its related companies and associates nor person connected to it accept any liability whatsoever for any direct, indirect or consequential losses including loss of profits or damages that may arise from the use or reliance on the info or opinions in this publication. Education What are Derivatives Market?
Morning Digest 3 Jan Morning Digest - 1 Apr, Final disposition of open positions on the last trading day of a contract month. A electronic futures trading brokers malaysia month in which delivery or cash settlement may take place under the terms of a futures contract. A term referring to cash and futures prices merging as the futures contract nears expiration, that is, the basis approaches zero. The purchase or sale of a futures contract as a temporary substitute for a cash market electronic futures trading brokers malaysia to be made at a later date.
Funds electronic futures trading brokers malaysia collaterals that must be deposited by a customer with his broker, by a broker with a clearing member electronic futures trading brokers malaysia by a clearing member with the clearing house. A call from a clearing house to a clearing member, or from a brokerage firm to a customer, to electronic futures trading brokers malaysia margin deposits up to a required minimum level.
Margin Futures positions are revalued daily at the closing electronic futures trading brokers malaysia, and variation margin is the payment receipt of losses profits reflected in the customer's account based on the daily revaluation.
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