Don Dawson
Online Trading Academy
A term that trips up a lot of Futures traders Pro and Novice alike is Ticks and Monetary Tick Values. A tick is the minimum amount a price can change for that market. The Stock market trades in minimum tick increments of .01 (one cent) per share unless a market maker trades between the bid and ask, then the minimum tick could be smaller. However, in the Futures markets there are no market makers (can I hear a hooray?), so the minimum tick is just that, “always” the minimum tick as long as the order is traded on the electronic platform.
The difference is that each Futures contract has a different minimum tick increment. And since each market has a different tick increment then the monetary value of each of these ticks will be different as well. Table 1 illustrates some market examples with minimum ticks and tick values.
The best way to find a minimum tick value for a Futures contract is to go to the contract specifications page of the Exchange website where the product trades at. For example, the 30 Year Bond (US) trades on the CMEGroup Exchange. Go to www.cmegroup.com and locate the product on the home page then find the contracts specification tab. Once there the minimum tick is identified for you. If a trader wants contract specifications for Sugar they should visit www.theice.com. All traders should be familiar with the Exchange websites that the products they choose to trade are actually traded on.
There is plenty of other useful information on the contract specification page. One of them that we are going to address more in this article is contract size or point value.
Have you ever wondered where the monetary value for each tick comes from in a Futures contract?
From Table 1 you can see the differences in monetary tick values yet sometimes the minimum tick can be the same as another market with a different monetary tick value, such as Crude Oil and Sugar which have the same minimum tick increment, but completely different monetary tick values.
Futures trade in contract sizes or point values. Table 2 illustrates some examples.
When you read a price quote (last price) that is on your chart, order platform, in a newspaper etc. you are reading a unit price for that product. Crude Oil is priced in dollars and cents per barrel, Grains are priced in cents per bushel, Sugar is priced in cents per pound etc. A Futures contract is made up of multiples of these units. If the Futures contract does not trade in units then the Exchange assigns a point value to that contract. The Stock Index and Interest Rate Futures use Point values instead of contract size.
Knowing the contract size or points and minimum tick value can help you identify what the monetary tick value is for the product you are trading. Table 3 will illustrate some of the markets you may be trading already.
To find the monetary tick value for any Futures contract you can use the following formulas:
Stock Indexes and Interest Rates
Points X Minimum Tick = Monetary Tick Value
All Other Markets
Contract Size X Minimum Tick = Monetary Tick Value
It is of the utmost importance that a trader knows and understands the product that he is trading.
“Never be bullied into silence. Never allow yourself to be made a victim. Accept no one’s definition of your life: define yourself.” Harvey Fierstein
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Editors’ Picks
EUR/USD holds firm near 1.1850 amid USD weakness
EUR/USD remains strongly bid around 1.1850 in European trading on Monday. The USD/JPY slide-led broad US Dollar weakness helps the pair build on Friday's recovery ahead of the Eurozone Sentix Investor Confidence data for February.
GBP/USD hovers near 1.3600 as UK government crisis weighs on Pound Sterling
GBP/USD moves sideways after registering modest gains in the previous session, trading around 1.3610 during the European hours on Monday. The pair could come under pressure as the Pound Sterling may weaken amid a fresh government crisis in the United Kingdom.
USD/JPY keeps the red below 157.00 on intervention risks
The Japanese Yen sticks to its modest intraday recovery gains against a broadly weaker US Dollar on the back of speculations that authorities will step in to stem weakness in the domestic currency. In fact, Japanese officials stepped up intervention warnings and confirmed close coordination with the US against disorderly FX moves. This, in turn, triggered an intraday USD/JPY turnaround from the 157.65 region, or a two-week top, touched in reaction to Prime Minister Sanae Takaichi's landslide win in Sunday's election.
Editors’ Picks
EUR/USD holds firm near 1.1850 amid USD weakness
EUR/USD remains strongly bid around 1.1850 in European trading on Monday. The USD/JPY slide-led broad US Dollar weakness helps the pair build on Friday's recovery ahead of the Eurozone Sentix Investor Confidence data for February.
USD/JPY keeps the red below 157.00 on intervention risks
The Japanese Yen sticks to its modest intraday recovery gains against a broadly weaker US Dollar on the back of speculations that authorities will step in to stem weakness in the domestic currency. In fact, Japanese officials stepped up intervention warnings and confirmed close coordination with the US against disorderly FX moves. This, in turn, triggered an intraday USD/JPY turnaround from the 157.65 region, or a two-week top, touched in reaction to Prime Minister Sanae Takaichi's landslide win in Sunday's election.
Gold remains supported by China's buying and USD weakness as traders eye US data
Gold struggles to capitalize on its intraday move up and remains below the $5,100 mark heading into the European session amid mixed cues. Data released over the weekend showed that the People's Bank of China extended its buying spree for a 15th month in January. Moreover, dovish US Fed expectations and concerns about the central bank's independence drag the US Dollar lower for the second straight day, providing an additional boost to the non-yielding yellow metal.
Cardano steadies as whale selling caps recovery
Cardano (ADA) steadies at $0.27 at the time of writing on Monday after slipping more than 5% in the previous week. On-chain data indicate a bearish trend, with certain whales offloading ADA. However, the technical outlook suggests bearish momentum is weakening, raising the possibility of a short-term relief rebound if buying interest picks up.
Japanese PM Takaichi nabs unprecedented victory – US data eyed this week
I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.
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