opportunities in futures trading
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Opportunities in Futures TradingWhy Investors must also be Traders?
Chong Kim Seng
CEOBursa Malaysia Derivatives Berhad24 September 2011 @ Bursa Malaysia
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The time required to execute a tradehas gone from minutes to milliseconds
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Webs of linked hubs provide global access to markets
Nine telecommunications hubs in Europe and Asia
New hub launched in Kuala Lumpur in May 2010
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Which do you prefer?
A Invest $10,000 to profit $1,000?
B Invest $1,000 to profit $1,000?
Cash-on-Cash Return: + 10% versus + 100%
Concept of LEVERAGE CONTROL & Trading on MARGIN
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Five (5) Time Frames
Very Short
Short
Medium
Long
Very Long
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Two (2) Trading Statements On Prices
Price is not something; Price is not anything;Price IS everything.
Prices dont move in a straight line.
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1500
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2700
10/1/1987
10/22/1987
11/12/1987
12/3/1987
12/24/1987
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2/25/1988
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10/13/1988
DJIAChart
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Dow Jones Industrial Average PricesTrading vs Investing Opportunities
Oct 16, 1987 = 2,246
Oct 19, 1987 = 1,738 (-508 points or -22%)
Oct 19, 1988 = 2,137 (+399 points or +23%)
In-between Movements = 6,586 points or 15X
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600
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1800
1/2/2007
3/2/2007
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FKLI
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FKLITrading vs Investing Opportunities
High = 1,600
Low = 800
Range = 800
In-between Movements = 12,661 points or 16X
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CBOT - Wheat PricesTrading vs Investing Opportunities
High = 1,300
Low = 400
Range = 900
In-between Movements = 15,891 points or 17X
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CBOT - Corn PricesTrading vs Investing Opportunities
High = 800
Low = 300
Range = 500
In-between Movements = 9,739 points or 19X
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CBOT Soybean PricesTrading vs Investing Opportunities
High = 1,650
Low = 650
Range = 1,000
In-between Movements = 18,261 points or 18X
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CBOT Soybean Oil PricesTrading vs Investing Opportunities
High = 70
Low = 29
Range = 41
In-between Movements = 665 points or 16X
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FCPO Crude Palm Oil PricesTrading vs Investing Opportunities
High = 4,300
Low = 1,500
Range = 2,800
In-between Movements = 43,948 points or 15X
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Have a view..and Trade!
Momentum OR Contrarian
Fundamental Analysis (Supply & Demand)
Value Analysis (Intrinsic Value vs Price)
Technical Analysis (Price Charts)
Aberration Analysis (Price Dislocations)
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Trading vs Investing..
Adjust mindsets & approaches Operate within shorter time frames Capitalize on in-between price movements
Long /Short /LongShort /ShortLong vs Long Only... Be equally versatile with buy first/sell later & sellfirst/buy later Be More Technical /Less Fundamental Optimize leverage with risk management control
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Four (4) Organizing Principles ExchangeTraded Products @ BMD
Integrity
Price Discovery
Liquidity
Transparency
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What you should ask for in Trading?
Transparent Prices
Transparent Information Flows
Immediate Known Executed Prices
Control over Buy/Sell Decision Making
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Decision Principle.
Money ON the table / Money OFF the table Stand ON the road / Stand OFF the road Trade it down Go Short
Trade it up Go Long
Decision Principle : GET ON / GET OFF
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Trading the World.
Global Outlook Accessing locally Trading globally
Trading as a life skill
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Time
Futures Price
Cash PriceConvergence
Delivery
Futures Price vs Cash Price: Movement & Convergence
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Two (2) Derivatives Products / Opportunities@ BMD
FKLI FTSE Bursa Kuala Lumpur Composite
Index Futures Contract
FCPO Crude Palm Oil Futures Contract
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KLCI Futures 5-year High Low Range
13
0
10
20
30
40
50
60
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100
01/03/07
03/03/07
05/03/07
07/03/07
09/03/07
11/03/07
01/03/08
03/03/08
05/03/08
07/03/08
09/03/08
11/03/08
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07/03/09
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01/03/10
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01/03/11
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05/03/11
07/03/11
RM/MT KLCIFuturesSpotMonthDailyRange(20072011)
HighLowDiff Mean Mean Mean Mean Mean
Mean=16.8
Mean=11.3
Mean=13.6
Mean=12.8
Mean=21.2
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CPO Futures 5-year High Low Range
13
0
100
200
300
400
500
01/03/07
03/03/07
05/03/07
07/03/07
09/03/07
11/03/07
01/03/08
03/03/08
05/03/08
07/03/08
09/03/08
11/03/08
01/03/09
03/03/09
05/03/09
07/03/09
09/03/09
11/03/09
01/03/10
03/03/10
05/03/10
07/03/10
09/03/10
11/03/10
01/03/11
03/03/11
05/03/11
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RM/MT CPOFutures3rdMonthDailyRange(20072011)
FCPO3rdMonth Mean Mean Mean Mean Mean
Mean=RM41
Mean=RM44
Mean=RM59
Mean
=
RM60
Mean=RM89
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Agriculture vs Energy Price
15
Correlation 2001 Present 2006 Present 2010 Present
FCPOvsWTICrude 83.4% 72.6% 69.0%
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Agriculture vs Precious Metal Price
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Correlation 2001 Present 2006 Present 2010 Present
FCPOvsGold 84.4% 66.8% 57.6%
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Agriculture vs Base Metal Price
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Correlation 2001 Present 2006 Present 2010 Present
FCPOvsCopper 82.2% 64.1% 89.2%
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Asian Agriculture vs US Agriculture Price
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Correlation 2001 Present 2006 Present 2010 Present
FCPOvsSoybeanOil 96.5% 93.7% 90.9%
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Definition of LUCK.
LUCK Preparation meeting Opportunities.
Ducks will line up for those who are preparedBe prepared
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Have two (2) accounts..
Investing Account Securities
Trading Account Derivatives
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Two Important Requirements forFutures Trading
Trade for Profits $$$
Exercise Good Risk Management
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Open a futures trading account.Be prepared.
www.bursamalaysia.com/derivatives
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