Getting Started with Futures | Barbara Armstrong | 10-1-19
They're, going to talk, about a, new product in the world of futures that was just launched, in May called. The. Micro. Emini, futures so, hang tight as always, we've got a lot of great information to cover and half, an hour together this morning. All. Righty. My. Name is Barbara Armstrong, today, the very first day of October, and here in Salt Lake City I must, confess ladies and gentlemen it is feeling like fall so. Time, to bust, out the jackets. And the scarves and all, the things that come along with cooler weather now I hear if you're on the East Coast as. Many of you are you guys are still seeing lots, of very summer-like, weather so, wherever you are I appreciate. You tuning in to, watch this, webcast. This morning hello to Bethany, and Sasha. Hopefully, that you are seeing things now Oh. Sasha, Jay, Frost is tuning, into from, Chicago. Bethany, Sasha, Chuck. Thank. You so much all for typing. A greeting into the chat it's, wonderful, to have such an interactive, class, okay. So we, can see on the screen in yellow here, two. Things one, every, coach now has a Twitter handle and in. This class. Sometimes. We get the chance to put trades, on and, we don't always have, as much of an opportunity to follow up so if you follow me on Twitter you'll see some of those trades, how, an, investor. Might. Choose to manage that example trade once we're in it so be Armstrong, underscore, TDA you'd, like to follow me we would love to have you on board also, if you're watching this on youtube if, you could just hit the like button below if you enjoyed this, subscribe. To our channel, if you haven't already and, if you are partnering, with a friend who maybe can't. Be watching this with you live today and you'd like to share it with them please feel free to share all of those things help our algorithms. And help us get the word out to more people so. Without further ado let's get right down to business get, through our important disclosures, and then over to the thinkorswim platform well. We'll go, over our agenda. And, our. Objective, today which of course all will center around the new micro, emini futures contracts. Everything. We cover in this class, is for educational, purposes only not a recommendation or endorsement, of any particular, investment. Or investment, strategy. Discussions. Of returns are hypothetical and, may not include the impact of commissions, and fees which. Certainly impact, our trading, returns, will vary in all investments, involve, risk including the loss of principal know, that futures. And futures options, trading, spoiler, alert' will be talking futures, options next week it's, speculative. Not suitable, for all investors also. Know that futures, accounts, are not. Protected. By the Securities, investor Protection corporation. Some. People call that cific, futures. And futures option trading privileges are, also subject, to review an approval, not. All clients will qualify so, just because you can trade something in your paper money account, doesn't, mean that when you go to your live account you're gonna have the same privileges, so I know that some people have been surprised, by that in the past so just want to give you a heads up also, know that with respect to the paper trading platform, it's a brilliant place, to learn but. Just because, you can be successful during, one time period and paper money doesn't. Mean when you go to your live account in a different time period you're going to get the same results, why, because. As we all know, market. Conditions, change daily. Also. Know that in order to demonstrate the functionality at, the platform, we need to use actual symbols, and we do however. That is not to be construed as a recommendation, on the part of TD Ameritrade, or myself any, investment. Decision you make in your self-directed account, is solely your. Responsibility. So. Satya. Hopefully. You can see, everything. Now if not, I, suggest you sign out and sign back, in again. It. Could just be a blip. And typically when you sign out and come back in again then you, know you'll be all set, okay. So. I have, created a. Little. Agenda, here. It's. Very little so, what we're going to do today is, look at the micro, emini, x' and we. Are going to compare, and contrast. The. Micros. A micro. Contract, versus. An emini, contract. Okay. So that's, really, what we're doing so what's the objective, the, objective is, one to make you aware that the, micro, minis, exist, and then, to look at when some. Investors, might choose to use a micro, emini. Contract. In in, place of using. The regular emini, z-- and so I think the first thing we have to understand, is really what the differences, are and and. Then, why, that, might be significant, to an, investor, or a trader so. What I have up here is, the. E-mini, S&P, 500, index futures and, we are going to use that as our, example, today the.
S&P, 500, index, futures and, if we bring up the e-mini z-- which, have been around for a very long time and, are. In fact, the. Most heavily. Traded futures. Contract. In the world the, e-mini, S&P, 500, futures and, if we come over here just let me grab my drawing, tool and, we, look at the volume on this you. Know we are not very far into our trading, day only an hour and a half and already over. 700,000. Contracts, traded, on, the, currently, active. December. Emini, so, this is our emini S&P 500. Index. Futures that, ticker symbol es. So. If we are to compare this and we say okay, well what is the current point, value, and we're, live in the market so this number is going to keep changing I'm just going to write. Down 29, 60 and we're going to create a little graph here so our current, point value, on this is 29, 60, now, this is one of the things that is different with futures, in that. You. Know if we were to look at a stock, let's say we were to look at Apple just to pick one that you know many people would be familiar with and. If, it says R this, is worth two hundred and twenty six dollars a share or, the current value is two hundred and twenty six dollars a share, that. Is what it would cost you to buy one share. When, we go back to the e minis. When. We see this. 2960. Now 29 60 50 number, that's, a point value okay. So what is a point, worth so if we come here to our little. Arrow and, then, come down we can see that. A point. Is made, up of ticks, and what, is it tick a tick. Is the smallest, amount, by, which a. Futures. Contract can. Move in value and as we can see here. These, vary, widely, so, with Bitcoin, a tick is five and, a. Tick value is $25. Here. We've got you know a thousandth. Of a point or maybe that's a ten thousandth. Of a point, we've. Got a hundredth of a point on oil, point, zero one on the, E Mini's. It's a quarter of a point and that's, worth 1250. So. Our, smallest, tick. Value, is a, quarter, of a point and that is worth. $12.50. And. The. Notional, so. Of what's a point worth well. A point, then to get to one point we'd, have to multiply that by four, so. A point, on the e-mini x' is worth $50. So. What does that make the notional, value of, our contract, worth well if we bring up our calculator. Here and we. Say okay, I'm going to have to make my scratch pad a little bit smaller. When, I bring this up and say okay if we just stick with our, 2960. And I. Multiply, that by $50. A point. It's. Worth a hundred and forty eight thousand. So. Where the share of Apple. Was worth two. Hundred and twenty six dollars or whatever it was worth, this. Is a point value that, we have to multiply, you. Know this is a point, number that we have to multiply by our point value, to, get that equivalent, notional, value of, one hundred and forty eight thousand. Now. Do we need a hundred and forty eight thousand, dollars in our account in. Order to buy. Or sell a. Futures, contract and. Emini, S&P 500. Futures contract to, be specific, no, what we need is, six, thousand, nine hundred and thirty dollars, that's the initial, margin requirement, and we, can see here, that these numbers are not the same the, tick values, are different the tick sizes, are different and the initial margin requirements.
Are Different so. The initial, margin requirement on. The. S&P 500. Emini x' is 69. Whoops. 69. Thirty I, think. It was. Yeah. 69, thirty now, when we get to the micro, so the ticker symbol on, this is. Mes. To. Stand for micro. Emini. X', now. When we look at the point value it's the same so just to do apples to apples because I know we're live in the market. We're, just going to put in twenty nine sixty, now. What is a tick with tick. Worth I can. Speak, what's, it tick worth, well. The. Tick size is a quarter of a point and the tick value is a dollar, twenty five so you can see that we moved the decimal over, its a, tenth. So. A dollar. Twenty-five. So. What would a point then be worth well. A point, would be worth five dollars. Instead. Of fifty dollars so. What would the notional, value be, and if you're, not so hot on decimals, you just take five times. Twenty. Nine. Sixty. The. Notional, value of, this contract, is fourteen. Thousand, eight hundred. Oops. Fourteen. Eight hundred, and. What's. The initial margin requirement. 693. Dollars. So. Why, might, this be interesting. To. An investor, well. When we look at some. Of the reasons, people trade, futures. You. Know and. You know for. Those. That are on the call you are. Likely. And I'm, not saying you couldn't be but you, might not be a farmer, growing wheat, or soil beet or soybeans. Or. Cocoa. Beans who, wants to secure, a price for, your product, or. You might not be a large manufacturer. Of Seir cereal. Who wants to guarantee. A. Price. For your ingredients which is one of the reasons that Futures. Trading first, got started with commodities, as a, retail, trader. One. Of the reasons. Might. Be. Speculative. So. You might, want to you. Know make, a profit. So. Based on if you're anticipating the, stock to move up you might the. Commodity, to move up or if, we're, using the S&P 500 today, as our example, if, your. Expectation. Was that you. Know we were waiting for this to bounce and move to the upside you. Might, want to buy a contract, if if it, broke, and you were expecting. It to move to the downside you might want to sell a contract, so to make, a profit, on a directional. Move. Another. Reason might be you're interested, in hedging, or, protecting. Your current positions. Now. If you have a smaller, account, size, to. Use and. Futures. Contract. Like. The regular emini. X' it. Might, be too much but. A micro, emini, might, be an. Appropriate. Way to hedge, a smaller, account, so, by having the micros, available. We, now have a. Product. In the futures arena, that. Some. Might be interested, in using. Who. Couldn't. Have used it before one. Because, there was too much risk so. If you're you, know your. Initial, margin requirement in 7,000, that. Might. Be too high for some investors, and you have to keep in mind that, just because, your initial margin requirement is six thousand nine hundred and thirty dollars it is possible, to lose more than that amount so when, you're looking at one contract. And you. Know an initial, margin requirement of. $693. We. Might have more. Investors. Or more traders interested. In looking. At futures, so. You. Know when we come to this and again. Actually. That isn't where I wanted to go I. Wanted to come here these, contracts. The micros, were just, announced, in May of this year and, we. Can see that you know although, it doesn't have near the volume, that the. Regular. A minis do still. Over a hundred and seventy thousand, contracts, traded just. Over an hour and a half into the trading day, so. You, know these have very quick you quickly. Become. Products, that have gained traction so. Do we have. Micros. Only, on the, S&P. 500, nope. There. Are now also micros. Available. On. The. Nasdaq, so. We could look at the m NQ. And. We. Can see a hundred and fifty thousand, contracts, traded on that one already today as opposed. To the regular. Emini. X'. You. Know two hundred, and fifty three thousand. So. You know not as big a spread so obviously. There. There. Was a demand, for this type of product. And you. Know if we look at these futures. Here. This is on the regular, Nasdaq now how does the chart look, compared. Mnq. The. Only difference. Is that you know I had a six-month, chart up and this, one, started. May, 6, we. Go back to. NQ. And you go back six months this one will go back to April. April. First. So. There. We go so if we wanted to place a trade, on. A micron, since we've used the sp500, as our example. We. Could put in a conditional. Order and say hey today it's pulling back but. The high today, was. 229. 90, for 25. Points. And. Say. If it went and. You, can pick whatever number.
You're, Comfortable, with some might say 1 point some, might save 5 points, so let's just pick 5 points, so if it went above. $29.99. 25. So. That sounds a lot like 3000. So, you could just say if this hits 3000. Or above. We'd. Like to enter this, trade. And buy, a, contract. So, if we wanted to do that we come out here to the trade tab we. Would pick the. Active. Contract. And. Why, do we want the active, contract, because it is going to have the. Least difference, the, tightest, bid-ask spread you can see here it's it's. One. Tick. Where. If we go out to the next one you're looking at 59, to 67, your bid us spread, becomes. Really. Quite significant. So, we want to buy a. Single. And. We are going to. Say. We want to make this a market, order good. To' cancelled, and we. Want to buy this if. This. Goes at or above. $29.99. 25. $29.99. 25. So, in other words if it moves to the upside. We'd like to participate in that and if, it doesn't then, we haven't entered a trade. Ahead, of the game and. Perhaps. Ended, up with a losing. Position so, we're. Bullish, if it looks like it's going to rally by, one. Mes. This is just an example. The. December. Expiration. So this is an 80. Days, to. Expiration we'd of course have a. Transaction. Fee, there and we want to buy if it goes above. $29.99. 25. And we. Could put that in our futures, bucket. There. We go, so, do. Are, there any questions on that I know we've talked about the micro, emini, before. Oops. Hedging, I. Can. Correct my spelling. There. Okay. So. Yeah this is a product. That has been really, embraced, by the marketplace, so far and we can see why that you. Know it's just, allowed. More. People with modest, account, sizes. To, be able to use this, use. A futures, contract in. A way that they might not have felt comfortable doing so before, so. That's. Our topic for today next. Week we are going to talk about options. And then, in the couple, of weeks following, that we're, going to talk about hedging. And how we can. Determine. An appropriate. Hedge. Size, so, that will be our topic for the next couple of weeks, okay.
And, Just in, closing remember that futures, and futures option trading is speculative. Also. Remember that in. Order, to demonstrate the functionality of the platform, we talked about actual, symbols, however that is not to be construed as a recommendation, we. Cannot begin to determine, the suitability of, any security or strategy. For an individual, traitor. Also keep in mind that the paper money application. Is for educational. Purposes, as well. So. In. Closing. Yeah. In closing, I just want to thank you for joining me today, again. If, you'd like to follow me on Twitter it's be Armstrong, underscore, TDA and don't forget to hit like and, subscribe and. If you found this helpful share. It with a friend, all of those things, are much appreciated and with, that have, a have. An absolutely, awesome day, best of success with your investing, in trading and I will look forward to seeing you in a webcast coming up soon take care of my friends, bye for now.