Futures Trading with EURO STOXX 50 & DAX Electronic Contracts

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1 Futures Trading with EURO STOXX 50 & DAX Electronic Contracts John F. Carter in conjunction with Eurex Futures Exchange & Infinity Brokerage 1

2 Disclaimer Eurex 2007 Deutsche Börse AG (DBAG), Clearstream Banking AG (Clearstream), Eurex Bonds GmbH (Eurex Bonds), Eurex Repo GmbH (Eurex Repo), Eurex Clearing AG (Eurex Clearing) and Eurex Frankfurt AG are public companies and are registered under German law. Eurex Zürich AG is a public company and is registered under Swiss law. Clearstream Banking S.A. (Clearstream) is a public company and is registered under Luxembourg law. The administrating and operating institution of the Frankfurt Stock Exchange (FSE) is DBAG. The administrating and operating institution of Eurex Deutschland is Eurex Frankfurt AG (Eurex). Eurex Deutschland and Eurex Zürich AG are in the following referred to as the Eurex Exchanges. All intellectual property, proprietary and other rights and interests in this publication and the subject matter hereof (other than certain trademarks and service marks listed below) are owned by DBAG and its affiliates and subsidiaries including, without limitation, all patent, registered design, copyright, trademark and service mark rights. While reasonable care has been taken in the preparation of this publication to provide details that are accurate and not misleading at the time of publication DBAG, Eurex, Eurex Bonds, Eurex Repo, the Eurex Exchanges, Eurex Clearing, Clearstream and FSE and their respective servants and agents (a) do not make any representations or warranties regarding the information contained herein, whether express or implied, including without limitation any implied warranty of merchantability or fitness for a particular purpose or any warranty with respect to the accuracy, correctness, quality, completeness or timeliness of such information, and (b) shall not be responsible or liable for any third party s use of any information contained herein under any circumstances, including, without limitation, in connection with actual trading or otherwise or for any errors or omissions contained in this publication. This publication is published for information only and shall not constitute investment advice. This brochure is not intended for solicitation purposes but only for use as general information. All descriptions, examples and calculations contained in this publication are for illustrative purposes only. Eurex offers services directly to members of the Eurex Exchanges. Those who desire to trade any products available on the Eurex market or who desire to offer and sell any such products to others, should consider legal and regulatory requirements of those jurisdictions relevant to them, as well as the risks associated with such products, before doing so. Eurex derivatives (other than DAX Futures contracts, Dow Jones STOXX 50 Index Futures contracts, Dow Jones EURO STOXX 50 Index Futures contracts, Dow Jones STOXX 600 Banking Sector Futures contracts, Dow Jones EURO STOXX Banking Sector Futures contract, Dow Jones Global Titans 50SM Index Futures contracts, Dow Jones Italy Titans 30SM Index Futures contracts, MDAX Futures contracts and Eurex interest rate derivatives) are currently not available for offer, sale or trading in the United States or by United States persons. Trademarks and Service Marks Buxl, DAX, Eurex, Eurex Bonds, Eurex Repo, Euro GC Pooling, Eurex Strategy WizardSM, FDAX, inav, MDAX, ODAX, SDAX, StatistiX, TecDAX, VDAX-NEW, Xetra and XTF Exchange Traded Funds are registered trademarks of DBAG. Xemac is a registered trademark of Clearstream Banking AG. Vestima is a registered trademark of Clearstream International S.A. itraxx is a registered trademark of International Index Company Ltd. SMI, SMIM and VSMI are registered trademarks of SWX Swiss Exchange. STOXX, Dow Jones STOXX 600 Index, Dow Jones STOXX Mid 200 Index, Dow Jones STOXX TMI Index, VSTOXX Index and Dow Jones EURO STOXX /STOXX 600 Sector Indexes as well as the Dow Jones EURO STOXX 50 Index and the Dow Jones STOXX 50 Index are service marks of STOXX Ltd. and/or Dow Jones & Company, Inc. Dow Jones, Dow Jones Global Titans 50SM Index, and Dow Jones Italy Titans 30SM Index are service marks of Dow Jones & Company, Inc. The derivatives based on these indexes are not sponsored, endorsed, sold or promoted by STOXX Ltd. or Dow Jones & Company, Inc., and neither party makes any representation regarding the advisability of trading or of investing in such products. The names of other companies and third party products may be the trademarks or service marks of their respective owners. 2

3 Trading Europe Part I: Intro to the Contracts Europe 101 Description of Contracts and How They Work Europe 102 Order Entry Strategies Part II: Technicals & Trading Trading 101: Basic Technical Setups Trading 102: Additional Resources 3

4 Europe 101: Contract Description for DAX It is a capitalization-weighted index comprising the 30 Largest German companies within the Prime Standard listed at the Frankfurt Stock Exchange (FWB ), in terms of order book volume and market capitalization. It is based on prices generated in the electronic trading system XETRA The DAX is a performance / total return index, it is assumed that all dividends and cash distributions are re-invested into the index. 4

5 Europe 101: Contract Description for Euro Stoxx 50 It is a capitalization-weighted index of 50 European Bluechips. It covers 12 of the Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. It captures approximately 60% of the free float market capitalization of the Dow Jones EURO STOXX Total Market Index, which in turn covers approximately 95% of the free float market capitalization of the represented countries. The DJ EURO STOXX 50 index is a price return index. 5

6 Europe 101: Contract Specifications for DAX Symbol: FDAX Contract Value: 1 point = 25 Euros EURUSD exchange rate is currently Euros x 1.35 = $33.75 USD per point Moves in ½ point increments, or Euros Euros x 1.35 = $ USD per tick Contract Months: Quarterly like ES, YM: March, June, September and December Trading Hours: 12:50 AM to 3:00 PM Central 6

7 Europe 101: Contract Specifications for Euro Stoxx 50 Symbol: FESX Contract Value: 1 point = 10 Euros EURUSD exchange rate is currently Euros x 1.35 = $13.50 USD per point Moves in 1 point increments (10 Euros) Contract Months: Quarterly like ES, YM: March, June, September and December Trading Hours: 12:50 AM to 3:00 PM Central 7

8 DAX average daily volume near 200,000 contracts 8

9 Euro Stoxx 50 average daily volume near 1 million contracts 9

10 Europe 101: MARGIN DAX is a big contract, worth $225,000 USD. This compares with the emini at about $72,000 USD and the big S&P at $369,000 USD One Dax contract is like trading 3 Eminis DAX requires overnight margin of 12,900 Euros, or $17,415 USD. DAX intraday margin for day trading is around $2,000 to $5,000 USD per contract Please Note: Decreased Margin = Increased Risk. 10

11 Europe 101: MARGIN Euro Stoxx 50 is closer in size to a mini. It s worth about $54,000 USD. This compares with the emini (YM and ES) at about $72,000 USD and the big S&P at $369,000 USD One Euro Stoxx 50 is like trading 1 YM or 1 ES Euro Stoxx 50 requires overnight margin of 3,150 Euros, or $4,252 USD. Intraday margin for day trading is around $500 to $2000 USD per contract. Please Note: Decreased Margin = Increased Risk. 11

12 Short Trade of 1 contract taken in each of these markets at the same time Euro Stoxx 50 Mini-Sized Dow DAX Up 2 ticks = +20 Euros 20 x 1.35 = $27.00 USD Up 5 ticks = USD Up 2.5 ticks = Euros x 1.35 = $ USD 12

13 Trading Europe Part I: Intro to the Contracts Europe 101 Description of Contracts and How They Work Europe 102 Order Entry Strategies Part II: Technicals & Trading Trading 101: Basic Technical Setups Trading 102: Additional Resources 13

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21 Past Performance is Not Necessarily Indicative of Future Results 21

22 Trading Europe Part I: Intro to the Contracts Europe 101 Description of Contracts and How They Work Europe 102 Order Entry Strategies Part II: Technicals & Trading Trading 101: Basic Technical Setups Trading 102: Additional Resources 22

23 Trade The Markets (TTM) Trend What is it? We use this indicator a lot, so we want to explain it early in the seminar as it comes up on many charts. Modified Version Of the Heikin-Ashi Technique. It s just a easier way to look at candle sticks. The heikin-ashi method (heikin means "average" or "balance" in Japanese, while ashi means "foot" or "bar") is a visual technique that eliminates irregularities from a normal chart, offering a better picture of trends and consolidations. 23

24 Trade The Markets Trend how is it calculated? The heikin-ashi candlestick technique uses modified open-high-low-close (OHLC) values and displays them as candlesticks but I had them converted to paint bar studies. The modified values are computed using these definitions: haclose = (O+H+L+C)/4 haopen = (haopen (previous bar) + haclose (previous bar))/2 hahigh = Maximum(H, haopen, haclose) halow = Minimum(L, haopen, haclose) 24

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26 Trading Europe Part I: Intro to the Contracts Europe 101 Description of Contracts and How They Work Europe 102 Order Entry Strategies Part II: Technicals & Trading Trading 101: Basic Technical Setups Trading 102: Additional Resources 26

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28 Book released December,

29 Q&A / Contact Information John Carter Jcarter@tradethemarkets.com For copy of presentation dax@aweber.com 29