VIOP 1
Hello, I recently received many e-mails and messages about trade from the VIOP side. Let's say a few words in the form of a series of articles.
Since the transactions on the VIOP mostly revolve around the index futures, the index will be a forward weighted post. In this article, which is the first of the series, let's go over some theoretical information. This information is theoretical, but important.
What is a futures contract?
When it comes to futures, the first thing that comes to mind is the liability that arises at the end of a maturity. In the books, it is said that futures are contracts that oblige the parties to the contract to buy or sell a commodity, value or financial indicator of standardized quantity and quality at the agreed price today at a specified future date.
So what are futures contracts used for?
1-Hedge (protection)
2-Investment
3-Arbitrage
Let's briefly explain why futures contracts are used. Increasing interest rates in the market and fluctuating exchange rates may affect market participants either positively or negatively. In order to hedge these price fluctuation risks, futures are used.
Speculators want to take advantage of the price difference in the market. In this way, the liquidity of the market is also ensured.
With speculators trading in the market, the number of buyers and sellers in the market increases.
Futures also offer arbitrage opportunities. Arbitrage is the process of buying a product at a low price and selling it at a high price. A risk-free gain appears due to the nature of the market. Arbitrage possibilities arise in two ways in the markets. Differences between the prices of a product with the same features in different markets at the same time. There is a difference between the spot prices and forward prices of the same product between the price that should be according to the transportation cost model and the existing price.
Terms you'll hear frequently in futures markets.
Long Position: The party that has the right and obligation to receive the underlying asset at the price specified in the contract. It is to buy with the forecast that the price will increase.
Short Position: The party that is obliged to deliver the underlying asset at the price specified in the contract. Selling with the forecast that the price will decrease.
Initial Margin: It is the collateral that must be deposited at the clearing house for the position before or before a futures contract position is taken. SPAN is determined using the method of portfolio collateral.
Maintenance Margin: It is 75% of the initial margin.
Settlement Price: It is the price that occurs in the closing range of the market or calculated according to the methods determined by the exchange and used to update the accounts.
Open Position: The number of long or short positions in a contract that have not been closed in reverse. (Since there is one short position versus each long position, it is sufficient to take into account either the long or short positions)
Open Position Concept in Futures Markets: In futures markets, the number of open positions in a newly opened maturity of a derivative product linked to any underlying asset is 0 (zero). At the end of the maturity, if there are any unclosed positions, these will be closed by the exchange with the final settlement price. In futures markets, the number of open positions is at least as important as the trading volume.
Leverage Effect: Futures markets provide investors with the opportunity to take large positions with a small amount of investment. Leverage is approximately 1/10 in index contracts and 1/20 in foreign currency contracts.
Since it is possible to control a high position with a relatively low margin rate (thanks to leverage), even small changes in the index can create you good profits if you are on the right side.
For example, when a long position is taken at a price of 100,000 in the BIST index-30 contract (955 TL deposit deposited), a profit of 300 TL is obtained when the price reaches 103,000 (30% gain). It should not be forgotten that, compared to the spot market, it involves a much faster and greater risk of loss.
Margin Calls: After the session closes, the end of day settlement prices for futures and option contracts are determined and all accounts are updated. For accounts that fall below the total collateral, maintenance collateral amount or with a cash collateral deficit, a «collateral completion call» is made to the relevant members. Members must fulfill their guarantee completion obligations until 15:00 on the day of T + 1.
Index 30 Futures Contracts, which is our main subject
Contract Size
The underlying asset is the index value divided by 1,000. Each index futures contract represents 100 underlying assets calculated in this way. (BIST30 Index / 1.000) * 100
Maturity Months
February, April, June, August, October, December. Contracts belonging to the nearest 3 maturity months in the current month are traded. If one of these three maturity months is not December, the December maturity month will be traded separately.
Reconciliation Type
Cash settlement.
Maturity Settlement Price
It is the price calculated by dividing the calculated value by 1,000 by weighing the time-weighted average of the index values announced during the last 30 minutes of the continuous auction on the last trading day of the BIST 30 Index in the spot market, and the closing value of the BIST 30 Index by 80% and 20%, respectively.
Maturity Date
It is the last trading day of each contract month.
Profit / Loss Accounts and Leverage Ratio
Profit / Loss for Long Position
(Price - Purchase Price) x Contract Size x Contract Quantity
Profit / Loss for Short Position
(Sale Price - Price) x Contract Size x Number of Contracts
Profits are reflected in the accounts on day T + 1.
Losses are reflected in the accounts on the day T.
There is no tax on BIST30 and Equity Futures Contracts.
We have learned these now. :)
The real adventure starts from here. Purchase and sale. Trade. Sometimes you take the mind off and put it aside and wear a straitjacket. Sometimes you have to be a robot. Sometimes you can't keep a secret. In short, if you do not know yourself, let's say the area where you will start to get to know yourself.
See you in the next article.
AUTHOR:
Ali Erkan TANACIOĞLU
“Investment information, comments and recommendations contained herein are not within the scope of investment consultancy.
Investment consultancy service; It is offered within the framework of an investment consultancy agreement to be signed between brokerage houses, portfolio management companies, banks that do not accept deposits and the customer.
The ratings contained herein are based on comments and personal opinions. These views may not be suitable for your financial situation and risk and return preferences.
Therefore, making an investment decision based solely on the information contained herein may not produce results in line with your expectations. "