Futures Trading 
An Introduction To The World Of Future Trading
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Futures Trading  - Contract Codes

Now, product codes can be a little confusing for someone new to futures trading, but don't worry, they are actually easier to understand than options, once you get the hang of them.

I've taken some examples from the Chicago Mercantile Exchange but other exchanges will have similar structures for their contracts.

Futures Trading - Contract Codes Explained

OK - now remember in futures contracts we are principally concerned with dates of expiry, so how are these specified. These are shown in the table below :

Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
F G H J K M N Q U V X Z

These are fairly straightforward as all you need to do to identify a contract period is to find the associated month with the letter shown on the contract. Now let's look at some CME quoted contracts for commodity products and exchange products :

CME Commodity Products Ticker CME Globex
CME Live Cattle LC LE
CME Feeder Cattle FC GF
CME Lean Hogs LH HE
CME Frozen Pork Bellies PB GPB
     
CME Foreign Exchange Products Ticker CME Globex
CME Australian Dollar AD 6A
CME British Pound BP 6B
CME Canadian Dollar CD 6C
CME Euro FX EC 6E
     

In the above table I have shown two very different groups of futures contracts, namely commodities and foreign exchange. Now the first thing to notice is that we have a ticker symbol,  and then a Globex ticker - why do we have two tickers for the same contract? - the answer is in how the contracts are traded. If you remember back to the exchange and how it works, we have futures traded both electronically and also in the pit, using open outcry. Well the first ticker refers to those contracts traded on the floor of the exchange by the floor traders, and the second ticker is those traded electronically via Globex, which was introduced in 1992 and was the first system to provide an electronic futures trading system. The system is at the core of CME electronic trading.

Is it confusing to have two tickers for the same product - well yes and no - I just wanted to make you aware of this if you came across it when looking at futures contracts and were confused as to why there were two tickers. As all your trading will be electronic, you may never come across this curious anomaly in the market, but if you ever go to the exchanges and watch the orders flash on the screens you will certainly see them there. Now in order to explain things further, I'm going to take just one of the above contracts, the CME Canadian dollar, and present the information as it would appear on your trading platform such as Interactive Brokers.

CME - Canadian Dollar
Name Canadian Dollar/US Dollar (CME/Globex) (6CH8)
TWS Symbol CAD    
Contract Type FUT    
Currency USD    
Country of Origin Canada ( CA)    
Exchanges CME/Globex    
Multiplier 100,000    
Expiration Date 20080318    
First Notice Date 20080318    
First Position Date 20080318    
Last Trading Date 20080318    
Contract ID 41003666    
CME Exchange
Local Name CDH8    
Local Class CD    
Price Parameters Range: >0 Increment: 0.0001  
Size Parameters Minimum Order Size: 1 Order Size Increment: 1  
Settlement Method Delivery    
Exchange Hours 09.30 - 14.00 Monday - Friday Sat/Sun Closed
GLOBEX
Local Name 6CH8    
Local Class 6C    
Price Parameters Range: >0 Increment: 0.0001  
Size Parameters Minimum Order Size : 1 Order Size Increment: 1  
Settlement Method Delivery    
Exchange Hours 08.30 - 1600 Monday - Friday Sat/Sun Closed

OK, now let's go through the above information which is actually quite straightforward. As you can see we have three 'sections' of information. The first is as the contract is specified by the futures broker, in this case Interactive Brokers, the second section refers to the contract traded in the pit on open outcry, and the third section is the contract as traded electronically on Globex. Now if we start at the top line, this contract is for the Canadian vs US dollar and the contract is traded through the CME exchange on Globex. The code 6CH8 defines the contract - if we look back to our table at the top of the page, 6C is our ticker for this contract when traded electronically, and H is the expiry month which in this case is March. Finally the 8 ( which we've not mentioned before) refers to the year, so in this case we are talking of a CAD/USD contract, with an expiry in March of 2008. The year of the contract is always shortened in this way so a 2009 contract would be specified '9' - easy really.

OK, the next line is how this broker refers to this contract so if you were trading online the CAD/USD contracts would all be referred to as CAD, the contract type is a future, the contract currency is USD, and the country of origin of the contract is Canada. Finally it tells us that this is traded on CME Globex.

Now the next line is very important as it tells us the multiplier that is to be applied to the contract - in this case 100,000 which is applied to the price parameters in the next section which will then tell us how much money we make or lose for each tick movement in the contract price. A tick, for new traders, is the minimum contract movement ( just like a pip in currency ). OK, the next four terms all specify the same date, so let's take each in turn as follows :

The final piece of information is the contract ID for this particular broker, in this case 41003666.

Now in section two we are looking at this contract traded on the floor of the exchange as the ticker is CDH8 ( the H8 are common to both ) and is therefore specified with the 'class' CD. On the next line we have price parameters and this is important and refers back to the point I mentioned above. If you remember the multiplier for this contract is 100,000 and the smallest increment in contract size is 0.0001. So for each tick up or down, our position will move by 100,000 *0.0001 which is 10. Now remember in this case our contract is priced in US dollars, so for each tick of movement our position will move $10 up or down. In spot currency terms this is equivalent to a standard lot size of 100,000 USD and each pip movement is then $10. For new futures traders there are smaller contracts called mini-futures so don't worry if this seems high risk as a starting point.

The next line is again important as it tells us that we can trade one contract if we wish ( some do not) and that we can buy in increments of one, so we could buy or sell two, or three etc. The settlement tells us that this is a physical delivery and as it is a currency contract would naturally be settled in cash, but as I have said before, if you are holding a long contract in coffee on expiry, I hope you enjoy coffee!! Finally we are told of the exchange hours ( which can be different to the trading hours - see below) and as this is the pit traded future these are different to those on Globex. Currency futures can be traded virtually 24 hours a day on Globex, and this will be identified somewhere in the contract specification, so please check, or ask your broker if you are not sure of what hours your particular contract can be traded.

The last section is the Globex contract, which has the different ticker ( 6C) and the only other difference are the trading hours, which are longer as we are now trading electronically for this particular contract ( although not shown here )

Phew - I didn't think I was going to get to the end of this page, but I felt it was important to explain all the various terms in details as they can be confusing ( even for experienced traders)

Now I want to explain how to manage your futures contracts. In futures trading there is a lot more to do than simply open your positions and forget about them!

 

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