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What You Should Know About the SPI Futures

What You Should Know About the SPI Futures

The SPI Futures or more specifically as SPI 200 Futures contract is the benchmark equity index contract in Australia which was based on the S&P/ASX 200 Index. The SPI 200 Index Futures are traded on the Australian Securities Exchange. Each contract is priced at 25 Australian dollars multiplied by the SPI 200 Index and are quoted in index points.

What is a futures contract?

A futures contract is an agreement under two parties to buy or sell (in this case, cash equaling the S&P/ASX 200 Index) on an indicated future date. Its price reflects the market's opinion of where the S&P/ASX 200 Index will close at expiry which is generally the third Thursday of every month.

Futures contracts are very useful in financial markets because they allow investors to take a look on the price movements for certain financial instruments with only an approximate small initial outlay and to close their position by putting an offsetting trade.

Future contracts are available worldwide across many equities commodities and fixed income markets. As the value of a futures contract is derived from other instruments, futures contracts are referred to as Derivatives.

A closer look at these Contracts

An SPI futures contract gives the owner the right to receive A$25 in cash for each index point that the index is trading at, at a specified future point (expiration date) in time.  So if the S&P/ASX 200 Index was trading at 5000 points at expiry, one SPI futures contract would be worth $125,000.

The SPI futures contract, unlike the share market, trades overnight, so, any overseas influences on Australia’s domestic market affects overnight trading in the futures contract. For example, when there is negative news from the U.S., it may drive investors to sell futures contracts overnight. This will make its value fall, whereas positive news will attract buyers making the contract value increase.

By taking the difference between the price of the futures contract at 4.30pm yesterday and the price at market close 8am today you can get a guide as to the expected rise or fall when the share market opens at 10am. A futures price yesterday of 4900 points combined with an 8am price today of 4950 points would predict a 50-point increase on the open in the share market.

Trading hours

The SPI futures trading hours cover a separate session during day and night, giving traders access for almost 24 hours a day. The trading hours or sessions are also dependent on whether daylight saving time is in effect in the U.S.

  • During US daylight saving time the SPI 200 trading hours are:

5:10pm – 7:00am and 9:50am – 4:30pm Australian EST (Sydney, Australia) and

  • During US non daylight saving time the SPI 200 trading times are:

5:10pm – 8:00am and 9:50am – 4:30pm Australian EST (Sydney, Australia)

Holidays

The SPI futures market is open for trading every trading day (Monday to Friday), except for official National Australian, and New South Wales, public holidays, with modified trading times on:

  • Thursday before Easter Friday
  • Christmas Eve (December 24th)
  • New Year’s Eve (December 31st)