Fixed income instrument

chandniwadhwani92
Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

Fixed income instrument

Postby chandniwadhwani92 » Tue Oct 21, 2014 8:35 pm

Stock index future
A long stock index futures position o s$p index 500 futures at 1051 would show a gain of 1750 in traders account if he index were 1058 at settlement date (250*7=1750).
Why did they multiplied with ?

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Fixed income instrument

Postby edupristine » Thu Oct 30, 2014 6:56 am

There is a concept of "contract multiplier" in stock index futures. For index futures, the contract size is simply the cash value per point of the index covered.

For instance, the contract size for Nikkei225 Futures traded is 500 yen per point. This means that if the Nikkei225 index is trading at 1000 points, 1 contract of Nikkei225 Futures will have a contract value of 500 x 1000 = 500,000 yen.

The contract multiplier can be 250, 500, 1000 etc.

In your statement above, the difference in index value is 7 and the contract multiplier is 250 generally (if not mentioned). Hence 7 is multiplies with 250 to get the value of the stock index futures contract.


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