What is the Notional Value of a Futures Contract? –
Notional value of a futures contract is how much total value the contract theoretically controls.
Contract Size * Underlying Price = Notional Value.
Bakkt ® Bitcoin (USD) Cash Settled Monthly Futures (BMC) for example has a contract size of 1 bitcoin and assuming the BMC price is $60,000.00, the notional value of the futures contract is $60,000.00.
What is the difference between Margin and Leverage? –
Margin is the amount of money deposited with the broker to control a futures contract. It is determined by the futures exchange and maybe adjusted by the broker to manage risk to their clients.
Leverage is the ability to use less money to theoretically control 1 futures contract compared with buying the product underlying the contract outright which amounts to the notional value of the futures contract.
To calculate how much leverage a futures contract gives, divide the notional value of the contract by the margin.
The BMC example above had a notional value of $60,000.00 and with a margin requirement of $18,000.00, is equal to approximately three times leverage on our money ($60,000.00 / $18,000.00 = 3.33).
What is a Point and a Tick? –
Point is the smallest price increment that can occur on the left side of the decimal point. (Example. 90.000)
Tick is the price movement that occurs on the right side of the decimal when looking at the price of a futures contract and is the smallest possible price change measured by markets. A Point is composed of Ticks. (Example. 90.000)
Mini US Dollar Index® Futures (SDX) has a minimum price fluctuation of $0.005 representing one tick and would move from 90.000 to 90.005. It takes 200 ticks to make one point or a move from 90.000 to 91.000.
Risks and opportunities for corporates and individual investors: HEDGING PORTFOLIO RISK –
Hedging bitcoin exposure with the Bakkt ® Bitcoin (USD) Cash Settled Monthly Futures (BMC) contract is a way to manage portfolio risk by taking a directional position opposite to the underlying asset as protection.
For example, a hedger may have plans to hedge downward price movement in bitcoin using futures contracts based on in-house market and portfolio analytical processes. The market analysis may use common technical analytical techniques such as support and resistance to formulate the trade decision. In the chart (Figure 1), if bitcoin is expected to weaken as it nears the resistance areas, the hedger may plan to enter into a short futures position using the Bakkt ® Bitcoin (USD) Cash Settled Monthly Futures contract under either price levels of $46,000 or $52,000 to lock in the value of their underlying bitcoin position.
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Editors’ Picks
EUR/USD weakens to near 1.1900 as traders eye US data
EUR/USD eases to near 1.1900 in Tuesday's European trading hours, snapping the two-day winning streak. Markets turn cautious, lifting the haven demand for the US Dollar ahead of the release of key US economic data, including Retail Sales and ADP Employment Change 4-week average.
GBP/USD stays in the red below 1.3700 on renewed USD demand
GBP/USD trades on a weaker note below 1.3700 in the European session on Tuesday. The pair faces challenges due to renewed US Dollar demand, UK political risks and rising expectations of a March Bank of England rate cut. The immediate focus is now on the US Retail Sales data.
USD/JPY drops toward 155.00 as focus shifts to US data
USD/JPY meets fresh supply and inches closer toward 155.00 in the Asian session on Tuesday. The Japanese Yen holds the upper hand over the US Dollar after Japanese Prime Minister Sanae Takaichi led the ruling Liberal Democratic Party to a historic landslide win and on intervention talks. Traders brace for key US economic data that could offer more clues on the Federal Reserve's monetary policy.
Editors’ Picks
EUR/USD weakens to near 1.1900 as traders eye US data
EUR/USD eases to near 1.1900 in Tuesday's European trading hours, snapping the two-day winning streak. Markets turn cautious, lifting the haven demand for the US Dollar ahead of the release of key US economic data, including Retail Sales and ADP Employment Change 4-week average.
GBP/USD stays in the red below 1.3700 on renewed USD demand
GBP/USD trades on a weaker note below 1.3700 in the European session on Tuesday. The pair faces challenges due to renewed US Dollar demand, UK political risks and rising expectations of a March Bank of England rate cut. The immediate focus is now on the US Retail Sales data.
Gold sticks to modest losses above $5,000 ahead of US data
Gold sticks to modest intraday losses through the first half of the European session, though it holds comfortably above the $5,000 psychological mark and the daily swing low. The outcome of Japan's snap election on Sunday removes political uncertainty, which along with signs of easing tensions in the Middle East, remains supportive of the upbeat market mood. This turns out to be a key factor exerting downward pressure on the safe-haven precious metal.
Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals
Bitcoin Cash trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.
Dollar drops and stocks rally: The week of reckoning for US economic data
Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.
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