IFM & Eurex Exchange educational screencast series

The following screencast series was produced in cooperation with the Institute for Financial Markets (IFM). This partnership brings IFM's best-in-class derivatives education to Eurex Exchange participants and the general industry.

Perhaps you're already trading stocks, ETFs, FX. Why might you wish to consider trading futures, too? Taking Eurex Exchange’s futures as an example, you'll learn that while futures are not exactly the same thing as a stock, bond, or currency, they share many similarities with cash market products while having a large trading cost advantage. We also consider the important safety mechanisms available through exchange traded derivatives that employ a central counterparty.

The leverage from trading futures is greater than in comparable cash markets. We invite you to come see why futures have so much more leverage and how risk management systems make sure losers promptly pay their losses and winners promptly collect their profits. The markets for securities have certain cash flows (dividends, coupons, interest, etc.), whereas futures markets do not have such payments. In this screencast, Eurex Exchange’s futures serve as an example.

How do you learn what the fair value is on an equity index futures contract? In a fair market, how would one determine whether a given value of an instrument is under or overpriced? This session presents a formal methodology for pricing futures, also known as the cost of carry model. It focusses on Eurex Exchange‘s European equity index futures.

How do you learn what the fair value of a bond futures contract is? Unlike equity index contracts, bond futures contracts are systematically too cheap relative to fair value. We invite you to come see why bond futures are priced differently than equity index contracts. Eurex Exchange’s European futures will be used to illustrate examples in this webinar.

Each market has its own personality and behavior. Nevertheless, they usually correlate and during tough times correlations even rise. Still the usual correlation between European and U.S. indexes can give your trading results an added boost. If you’re already trading U.S. equity index futures, why not diversify with Eurex Exchange’s EURO STOXX 50® Index and DAX® Futures?

Perhaps you’ve been trading the U.S. Treasury Note Futures curve for many years. If you’re interested in learning about European sovereign bond futures available at Eurex Exchange, this session is for you. We explore European debt futures: Euro-Schatz, Euro-Bobl, Euro-Bund, Euro-Buxl®, Short-/Medium- and Long-Term Euro-BTP, and how these contract markets differ from U.S. Treasury Note Futures.

Most large sovereign nations have their own version of what we call LIBID or LIBOR. In Europe, a prime credit corporation can usually borrow at EURIBOR (European Interbank Offered Rate) flat. We invite you to see how trading the EURIBOR curve at Eurex Exchange is very similar to trading Eurodollars in North America. We also discuss combining EURIBOR trades with Eurodollar trades to create spreads that are sensitive to the relative performance of European versus North American LIBOR. The European debt crisis creates opportunity to trade your opinion of how these two similar interest rates perform going forward.

Many North American traders already know similar U.S. trades as NOB trades (Notes over bonds).We begin by evaluating the various sovereign securities that are eligible to be delivered against the Euro-Schatz, Euro-Bobl and Euro-Bund. Next, we evaluate which of the securities in the delivery basket is the cheapest-to-deliver (CDT). By evaluating the various basis relationships, along with carrying charges, between cash and futures markets; the CTD bond can be determined.

After determining the cheapest-to-deliver (CTD) bond that the future contract is tracking, we aim to understand the volatility properties of the given future and the respective bond. We develop an equation that ties the volatility of the cash market to the volatility of the future markets. Once we understand the Basis Point Value (BPV) of the various future contracts, it’s possible to construct the appropriate spread-ratio depending on how you think the yield curve might change. Strategies for trading parallel and non-parallel yield curve shifts using products available at Eurex Exchange and other global benchmarks are developed.

Having identified the cheapest to deliver (CTD) bond for each futures contract maturity, along with the future contracts’ Basis Point Value (BPV), we can now create trading strategies that deliver profits if one yield curve flattens or steepens relative to another sovereign yield curve. For example, if you thought the Italian sovereign curve might steepen relative to the German sovereign curve, how do you trade this view with an appropriately weighted futures spread? Eurex Exchange’s fixed income futures will be used to illustrate examples in this webinar.

Like the Dow, SPX, Nasdaq, Russell 2k, the European equity markets offer a rich set of indexes that have different volatility properties. You might think small capitalization stocks outperform large capitalization stocks. This webinar evaluates how these various index futures traded at Eurex Exchange (EURO STOXX®, EURO STOXX 50®, DAX® Index Futures) behave relative to one another and U.S. indexes.

Now three years old, the European sovereign debt crisis continues to morph into new sets of problems. Eurex Exchange offers futures on German, Italian and French government bonds. With credit ratings in flux, this webinar demonstrates how to use futures on AAA and A rated debt to express your point of view. Will the spreads continue to rally, or have the yield differentials become too great?

Concern that South Europe’s economies are out of sync with Northern Europe has created great uncertainty about which sovereign’s credit will be preserved, and which might teeter towards default and more ratings downgrades. This webinar is focused on how to use Eurex Exchange’s futures markets to trade your opinion about what might happen next. 

Perhaps you own a portfolio of SPX. If you’re not bullish on the S&P500, you might contemplate hedging your exposure to the S&P500 while simultaneously creating a proxy long portfolio versus the DAX®, EURO STOXX®, EURO STOXX 50®, or some other index on which you have a positive view. This webinar discusses how you can synthetically swap your asset exposure from one equity index to another; all with futures, which eliminates tax issues.

If you have a view that one sovereign yield curve will be moving relative to another sovereign yield curve; you may have a trade waiting for you with CHYS. First, we weight the Basis Point Values (BPV) of each sovereign spread in the local market: Euro-Schatz versus Euro-Bund and Short-Term Euro-BTP (Italian sovereign credit) versus Long-Term Euro-BTP Futures. Next we compare the relative BPV of one sovereign spread vs. the other sovereign spread to calculate the proper spread ratio to be duration neutral in each market, currency neutral too if you’re trading Gilt Futures vs. Euro-Bund Futures.

Does the European Central Bank’s (ECB) president Mario Draghi need to prove his inflation fighting credentials or can we expect more dovish policy the ECB? As the U.S. Federal reserve (FED), Bank of England (BOE), Bank of Japan (BOJ) change policy, it changes the “carry” in many of our interest rate markets. If you can anticipate which central bank might be more/less hawkish or dovish; we’ll show you how to create an interest rate spread trade with Eurex Exchange’s interest rate futures to exploit that opportunity. 

Are you a buy-and-hold investor, or do you trade in/out? If you buy cash stocks you get a positive expected return (your mileage may vary), you get dividends (maybe), and you get to vote the stock. If you trade a stock index future like Eurex Exchange’s EURO STOXX 50® Index Future; you get something that behaves very similarly to the stock market, but you don’t get dividends and you don’t get to vote the stock. If the return on stock basket is a mix of dividends and capital gains/losses; which accounts for the biggest piece? If most of the return comes from price changes, then we can get a very similar exposure to the market using futures while lowering the cost significantly.

Students of markets like to track how prices evolve over time. Is it cheaper this year, or last year? Technical analysis plots the time series of prices in graphic form to provide a better understanding of where the market may move next. You’re invited to learn some of the most basic tools, indicators, and principles developed by Charles Dow in the 19th century.

VSTOXX® Futures appeal to a broad spectrum of users, from conservative ones to those with a greater appetite for risk. This webinar explains how traders and investors who have long positions in equities or equitiy indexes can offset bad-tail risk by buying VSTOXX® Futures and how those with short positions in equities or equitiy indexescan sell volatility for a partial hedge. Conversely, for those interested in assuming greater risk, this webinar outlines how VSTOXX® Futures can be harnessed to strengthen directional views on the equities markets.

The views and opinions offered by individuals or their associated firms in interactive seminars (webinars) are solely those of the authors, and do not necessarily represent the views of Eurex.
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