• Home/
  • Securities&Futures/
  • Futures Contracts

Securities&Futures

Futures Contracts

The trading of Hang Seng Index Futures and Option Contracts is very active, local and international investors are actively participating in trading these products.
We provide our clients the following index futures and options contracts of Hong Kong Futures Exchange Limited for trading, including

Futures

Hang Seng Index Futures, Mini – Hang Seng Index Futures

H – Shares Index Futures, Mini H – shares Index Futures

Options

Hang Seng Index Options, Mini – Hang Seng Index Options

H – Shares Index Options, Mini H – Shares Index Options

Morning Trading Session
Pre-opening Session
8:45:00 – 9:10:59 Accept Limit Order & Auction Order (Can modify and cancel orders)
9:11:00 – 9:12:59 Only accept Auction Order (Cannot modify and cancel any orders)
9:13:00 – 9:14:59 Open Allocation (Cannot place orders, cannel orders and modify orders )
Morning Session
9:15:00 – 12:00:00 Only accept Limit Order (Can place, cancel or modify orders)
Afternoon Trading Session
Pre-opening Session
12:30:00 – 12:55:59 Accept Limit Order & Auction Order (Can modify and cancel orders)
12:56:00 – 12:57:59 Only accept Auction Order (Cannot modify and cancel any orders)
12:58:00 – 12:59:59 Open Allocation (Cannot place orders, cannel orders and modify orders )
Afternoon Session
13:00:00 – 16:30:00 Only accept Limit Order (Can place, cancel or modify orders)
After Hours Futures Trading
After Hours Session
17:15 - 23:45 Only accept Limit Order (Can place, cancel or modify orders)

Note: No Pre-opening Session for Hang Seng Index Options, H – Shares Index Options, Mini – Hang Seng Index Options, Mini H – Shares Index Options

Margin Requirements

Clients must deposit sufficient initial margin required by HKFE before placing any orders. Margin requirements would be varied based on the market situations. Maintenance margin is 80% of the initial margin. If a client’s margin requirement is lower than its maintenance margin, the client should immediately deposit sufficient funds to recover the margin on or above the initial margin. Otherwise, we reserve the right to close the order(s) for a client without any notice in advance.

For trading option contracts, HKFE uses Standard Portfolio Analysis of Risk (SPAN) for calculating the real-time margin level. The margin level of a client’s position must satisfy real-time margin level. If a client’s position includes futures and options, the margin level of the position must meet the real-time margin level. If a client’s margin level is lower than real-time margin level, the client should immediately deposit sufficient funds to recover the margin on or above the real-time margin level. Otherwise, we reserve the right to close the order(s) for a client without any notice in advance.

Basic Knowledge of Futures Contracts

Futures Contracts

Futures Contracts is a kind of derivatives. Both (Buy and Sell) sides of futures contracts promise to buy or sell specific underlying with specific quantity and price in a specific date in the future. Now, not all the futures contracts are settled by underlying. For example, index futures are settled by cash generally.

Terms of Futures Contracts

There are many kinds of futures contracts, but they have some common characteristics. Most of the exchange traded futures contracts in the market have some frequent used terms:

Underlying:

Futures contracts can be linked up with different underlying assets. It includes stocks, indices, currencies, interest rates and even oil, beans, gold and so no. There are interest rate futures, forex futures, gold futures, stock futures and stock index futures (e.g. Hang Seng Index Futures).

Contract Price:

The price of a futures contract is registered in the clearing house, which is the negotiation price of a contract.

Contract Multiplier:

Contract value is calculated by the contract price multiplied by contract multiplier. Now, the contract multiplier of Hang Seng Index Futures and H – Shares Index Futures Contracts is HKD 50 per point; the contract multiplier of Mini Hang Seng Futures Contracts is HKD 10 per point. The underlying of a stock futures contract traded in HKEx is one lot related shares.

Last Trading Date:

The last day of a futures contract can be traded in an exchange.

Last Settlement Date:

The date that buy and sell sides will settle the futures contract.

Last Settlement Price:

It is used to calculate the settlement value of the futures contract which is determined by the clearing house. The final calculated value of the contracts is calculated by the settlement price multiplied by the contract multiplier.

Settlement Method:

Futures contracts could be settled by cash or related underlying. Many futures contracts traded in HKEx are settled by cash.

General Functions of Futures Contacts

There are three reasons for investors to trade futures contracts.

Trend of the Market:

If forecasting the market will go up, an investor may buy related futures contracts for investment. If the last settlement price is higher than the contract price, profit will be generated. On the other hand, if the price of the futures contract is higher than the contract price on or before the last trading date, profit could be earned that the contract will be sold to close the long position. On the contrary, if forecasting the market will go down, an investor may sell related futures contracts.

Hedge:

Hedge strategies are usually used to offset the negative factors affecting the return of the investment portfolio. If forecasting the price of the underlying will go down, an investor may use “short position hedge” strategy to sell moderate futures contracts to hedge the down side risks of the investment portfolio. If forecasting the price of the underlying will go up, an investor may use “long position hedge” strategy to buy related futures contracts to lock the price of related underlying assets. If the price of the underlying assets will go up, an investor can use the pre-determined price which is lower than the market price to buy related underlying assets.

By using futures contracts for hedging, an investor must remember that the underlying assets must be the same or almost the same as the assets in the investment portfolio, and the risks could be hedged effectively. For example, Hang Seng Futures Contracts is not a good tool to hedge the investment portfolio of non – Hang Seng Index Stocks.

Arbitrage:

Arbitrage is the profit could be earned from the unusual price difference between futures and cash market with buying low and selling high. To engage in arbitrage, an investor could trade contrarily in two markets at the same time.

Possible Negative Influence of Leverage Effect:

Futures contracts are leveraged investment tools. Return can be levered by the leverage times with leverage effect, but it may bring loss levered by the leverage times at the same time. An investor can earn considerable return levered by the leverage times in a short while with futures contracts trading, but it may bring significant loss with the same leverage times. As a result, futures contracts are more suitable for investors who have rich investment experience and strong self-discipline. An investor should soundly understand the characteristics and risks of futures contracts, ensure related futures contracts fit his/her financial situations and risk tolerances, or he/she should consult his/her professional investment consultant(s) first.