How to Calculate Stock Index Futures
- 1). View the futures contract specifications for the market you wish to trade. You can find this information online or through your broker. Each futures contract represents a set quantity of the underlying instrument it tracks. In the case of stock indexes, each futures contract relates to the price level of the index in some way. For example, one DJIA futures contract has a value equal to $10 x the price of the DJIA. You can use several sources to get index prices, including CME Group, Yahoo! Finance and TFC Charts (see Resources).
- 2). Check the current price of the index futures market. After obtaining the price, use the multiplier in the futures contract specifications to determine the value of a contract. For example, if DJIA futures are trading at 10,650, the value of one contract is 10,650 x $10 or $106,500. Note that the margin needed to buy a futures contract is much less than this full value because of the amount of leverage used in the futures markets.
- 3). Calculate potential profit and loss using the tick size. In futures trading, the tick size is the minimal increment in which price can move. In DJIA futures, the tick size is one point and each tick is worth $10. Assume that the market is trading at 10,650 and you expect a bull move to 10,690. You plan to enter a trade by purchasing two contracts. Therefore, your expected profit on the trade is 40 (points) x $10 x 2 (contracts) or $800.
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