YM Contract Basics

[smallfry 10]

I am a new trader and I like the possibility of YM trading.

There are some things i know about YM and some things I dont. Can anyone hlep fill in the blanks?

 

I know that YM works off a point system with each point being worth $5, so if i buy one contract long at 12330 and sell at 12335 then i made 5 points times $5 per point for a $25 net gain.

 

I have also been told that YM doesnt devalue over time like options but that it just expires on the third Friday.

 

1. What I dont know is what a contract costs to purchase.

2. Like if I wanted to buy one contract for June 08 Futures.

3. What if I wanted to buy June?

4. I also dont know if there are trade limitations on daytrading accounts under 25k like options.

5. If I only have enough in my account for 2 contracts, is there a limit of times i can scalp in and out of the market in a day?

Thanks everyone!

[Soultrader 12]

Hi,

To answer your question YM futures contract have the following expiration months: March, June, Sep, Dec. The cost per roundtrip transaction is dependant on your broker. This is a fee you should negotiate directly with your broker. Depending on your volume roundtrip commision can range $3-$5 per roundtrip.

Futures trading is not subject to the 25k minimum accounts. You will not be flagged as a day trader even if you place 100 trades a day with an account smaller than 25k. Most futures brokers will allow you to open an account as low as $5,000.

There is no limitation on how many times you can trade the markets a day. Your contract size will be based on how much margin you can put up. But since you sound like you are still new to this, I would not even consider risking money at all. Or even think about trading 2 contracts before even trading 1.

[smallfry 10]

OK, i get the commission and Im fine with that.

But the contracts vary in size?

Let's assume i have an account open with 5k in it.

If I buy one contract, how much cash do i need to pay for it?

See, im use dto options where you buy it for 2.10 lets say, and they come in packs of 100, so one contract costs $210.00.

Can you put in those terms? sorry im not getting this part of it.

[BlowFish 10]

You buy (or sell) the contract on credit. You provide margin (a deposit) against potential losses. Exchanges have a margin requirement based on volatility and point value of the instrument being traded. The overnight margin is often more than the daytrading margin (more risk). Many brokers do there own risk analysis and allow you to trade with lower margin deposited. Dont be tempted to trade over leveraged just because they allow you to! With futures accounts are usually settled at the end of the day (google settlement) essentially money is transferred from the losers accounts to the winners accounts. This is one of the reason you have brokers as they organise the settlement of customer accounts (though some clear through a third party).

[Eiger 10]

OK, i get the commission and Im fine with that.

But the contracts vary in size?

Let's assume i have an account open with 5k in it.

If I buy one contract, how much cash do i need to pay for it?

See, im use dto options where you buy it for 2.10 lets say, and they come in packs of 100, so one contract costs $210.00.

Can you put in those terms? sorry im not getting this part of it.

 

Hi. There is only one YM contract, and it doesn't vary in size. One contract is one contract. Its value will vary, depending on the value of the DOW 30 stocks. A YM contract's value is $5.00 times the Dow Jones Industrial Average Index. Each point is worth $5.00, so if the index goes up by 100 points, the value of the YM contract goes up by $500.00. Although contracts do expire four time a year, there is no time decay to worry about.

 

If you buy or sell a contract, you put up margin (it is different than the preimum paid in buying a call or put). The exchange sets the margin, though it may be modified by the broker. Required margin amounts will sometimes change when the volitility of the market changes. Current speculative margin requirements set by the exchange for the YM is $3125 for intial margin, $2,500 for maintenance margin (meaning that if your trade suffers a loss of the intial margin, you need to put up an additional $2,500 for margin, not just the loss amount). My broker requires $1750 in margin for day trading the YM, but you have to close the position by the end of the day, else it goes to $3,500 (which is more than set by the exchange). Margin can be less when part of a hedge or spread strategy.

 

Since you are an options trader, think of a futures contract as an at the money call or put that you have written (sold) without any farther out offsetting option. You need a certain amount of margin in your account for any naked option you write. It is conceptually the same for YM contracts. Each night, your account gets marked to market. Any profit or loss is credited or debited from your account.

 

So, if you have $5,000 in your account to start, and you enter long (buy) one YM contract during the day, $1,750 is "frozen" in your account. That margin is set aside to cover any loss you may have. You are free to do whatever you want with the remaining $3,250. If your trade makes 50 points in profit and you close it out, the initial margin is released and $250 is credited to your account. If you close the trade at a loss of 50 points, $1,500 is returned back to your account ($1,750 margin less $250 in loss). If you decide to hold the trade overnight, the margin will increase to $3,250 for each contract you hold.

 

It is a bit different than options

Edited April 2, 2008 by Eiger

[Blu Bull 10]

Thanks a lot for the info. answered a lot of questions

[brownsfan019 17]

Thanks a lot for the info. answered a lot of questions

 

Blu - spend some time at http://www.cmegroup.com/ and http://www.cme.com while it's still there.