The trend of recent trading days has made investors experience the feeling of "being cheated back after cutting meat" again. In fact, in addition to short positions, cut meat, hold up, there is another way to deal with risk, but also the most effective means of risk management, that is, stock futures.

However, compared with the nest wheel and the CBBC, the derivative products of stock futures appear to be slightly "minority". In order to enable more investors to better understand stock futures, Zhitong Finance APP will give an in-depth introduction to stock futures in the Hong Kong stock market.

What is stock futures?

The so-called futures generally refers to the futures contract, which is a legally binding commitment to buy and sell, in which both parties stipulate that at a specific time and place in the future, a standardized contract in which a certain number of subject matter is delivered at an agreed price.

Stock futures are futures products based on relevant individual stocks, which stipulate to buy or sell a certain number of stock values (contract multipliers) at a specific price (contract price) on a specific date in the future.

According to Niuniu's understanding, the related stocks of stock futures are stocks with large market capitalization and active trading, which belong to the industry leaders, mainly blue chips, and stocks that investors are familiar with. As of February 2021, the HKEx has a total of 81 stock futures contracts available for trading. The specific list can be found on the official website of the HKEx.

Stock futures contracts are traded on the Hong Kong Futures Exchange Limited (HKFE) and performance bonds are provided by the Hong Kong Futures Clearing Limited (clearing house). The value of the stock futures contract is equal to the contract price multiplied by the contract multiplier, that is, the value of the related stock. Investors buying and selling all stock futures contracts are required to deposit deposits (commonly known as "margin") when opening positions in the stock futures market to ensure that contractual obligations are fulfilled.

It is worth mentioning that the futures deposit of the Futures Exchange adopts an absolute value, which is different from the proportional deposit used in the mainland. The clearing house uses SPAN (Standard portfolio risk Analysis) to calculate the futures deposit. The level of the deposit is related to the stock price level and the fluctuation range of the stock price. Investors involved in the trading of stock futures contracts do not know when the clearing house will adjust the deposit and can only increase or decrease in accordance with the notice of the clearing house.

If the market goes as expected, then investors just have to wait for the money to be collected. However, if the market develops in the opposite direction as expected, causing the deposit to fall below the maintenance deposit level, investors will need to repay the funds within a specified period of time to keep the deposit at the original basic deposit level (commonly known as "replenishment"). Otherwise, investors will face the risk of leveling.

As far as Niuniu understands, after the close of each trading day, the clearing house will calculate the book profit and loss of each stock futures contract (at market price), and then deposit the profit / loss into or withdraw from the account of the buyer / seller of the contract, the amount is equal to the difference between the contract price and the daily settlement price multiplied by the contract multiplier.

In terms of contract duration, stock futures are divided into the current month, the next two months and the following two quarters. The last trading day, that is, the time when you can finally transfer the contract, is set on the second business day of the month when it expires. If investors in stock futures wish to close their positions before the expiration of the contract (commonly known as "resale"), the investor who originally sold the contract only needs to buy back a futures contract, while the investor who bought the contract will sell a futures contract.

The expiration date, which is the day on which the final price is settled to perform the contract, is stipulated on the first business day after the last trading day. Stock futures will be settled in cash according to the final settlement price, without involving physical settlement of the relevant stocks. This rule is partly to avoid having too much impact on the spot market.

In order to ensure sufficient liquidity in the market, the Hong Kong stock futures market practices the market maker system. According to the trading procedures of the exchange, the market maker has the responsibility to provide continuous or responsive quotations of not less than the specified number of shares for stock futures contracts within the specified price difference of buying or selling. According to Futuo Niuniu APP, at present, nearly 80 futures companies and securities companies provide liquidity services for Hong Kong stock futures, but not every stock futures has liquidity provided by makers, so we should be careful about liquidity risks.

What is the wonderful use of stock futures?

In the derivatives market in Hong Kong, although the attention of stock futures is relatively low, it is actually used for many purposes.

Stock futures, like turbo CBBCs, are leveraged financial derivatives.

As far as Niuniu knows, investors who like turbines and CBBCs are mostly obsessed with their leverage, which can magnify the changes in relevant asset prices to achieve the goal of "small and broad". As a matter of fact, the main feature of stock futures is the leverage effect. A contract can be controlled only by paying a deposit, thus playing the role of "sawing a big tree".

Take the current Anhui Conch Cement (00914) as an example. A contract for Anhui Conch Cement individual stock futures is bought and sold by Anhui Conch Cement. On that day, the average price of Anhui Conch Cement was 40.32. On that day, it cost HK $20160 for Anhui Conch Cement to buy 500 shares, which is also the total value of a contract.

According to the deposit level of Anhui Conch Cement stock futures contract announced by Hong Kong Exchanges and Clearing, the basic deposit for clients is only HK $2832, that is, Anhui Conch Cement, who only needs about 14% margin to buy 500 shares, with a leverage ratio of about 7.12 times.

At the same time, the cost of buying and selling futures contracts is often lower than the cost of buying related stocks of the same value, and there is no stamp duty to buy and sell stock futures. If you buy an Anhui Conch Cement individual stock futures contract trading unit is 500 shares Anhui Conch Cement, you only need to pay a transaction fee of HK $1 and a SFC levy of HK $0.10, totaling HK $1.10. According to Anhui Conch Cement's closing price of HK $39.65 on October 24, the purchase of 500 shares of Anhui Conch Cement would have to pay a transaction fee of HK $0.99, a SFC levy of HK $0.54 and stamp duty of HK $19.83, totaling HK $21.36.

Stock futures trading can provide investors with an effective hedging effect.

The trading of stock futures transfers the price risk from the investors who want to reduce the risk of holding to the investors who are willing to bear the risk in order to obtain potential returns, which helps the former to reduce the price risk brought by stock investors.

For example, a Meituan investor will get the lifting of the ban on shares on October 30, but he is worried that Meituan may still fall in the current market environment, and that an one-time clearance after the lifting of the ban will have a greater impact on the stock price. affect your actual trading price. In such a case, the investor can choose Meituan futures, lock the buying and selling price in advance, and avoid the one-time impact of impact costs on the market.

Suppose the customer shorts a Meituan stock futures contract (500 shares) at the price of HK $400 today and holds it to the settlement date for settlement, then the customer is equivalent to selling his 500 shares of Meituan at a price of HK $400 today in advance, no matter how volatile the stock price is on the balance sheet day, or how many shares are lifted on the same day, it will not affect the customer's profit or loss on these 500 Meituan shares.

If the closing price of the stock falls to HK $300 on the settlement day, the client's profit on a Meituan stock futures 1810 contract is (400,300) * 500 = 50000 Hong Kong dollars, while he sells 500 shares of Meituan shares at the closing price (HK $300). You get HK $300, 500 = 150000. With the amount of stock sold plus HK $50000 of futures profits, this hedging can get a total of HK $150000 + 50000 = HK $200000. For the Meituan shares sold, the selling price per share is 200000 / 500 = 400 Hong Kong dollars, which is the same as the selling price of today's futures. That is why we say that selling stock futures at HK $400 today is tantamount to selling stocks in advance.

In addition, due to the settlement mechanism of the HKEx, the settlement price of stock futures refers to the closing price of the stock on the same day, and clients only need to sell the shares they hold in the form of collective bidding on the day of stock futures settlement, which can completely hedge the risk of futures positions without any exposure of net positions. Hong Kong's large capital allocation is used to trading during the collective bidding period, so collective bidding sometimes accounts for 2-30% of the daily turnover. Any stock price loss (or the loss caused by the lifting of the ban) caused by smashing in the collective bidding will be fully reflected in the profits of the corresponding stock futures at 1:1, thus making up for the losses that customers may suffer in batch reduction.

Stock futures trading can provide investors with opportunities for arbitrage.

As far as Niuniu understands, there is a close relationship between futures prices and Hong Kong stock prices, and there will be room for arbitrage if there is any abnormal deviation between the two.

For example, the price of a stock is HK $35, but due to the recent market downturn, the futures price of the stock is HK $34, and investors can sell the stock and buy its futures for arbitrage. When the futures expire, the spot and futures will tend to be consistent. After the futures are settled, investors will be able to make a profit difference of HK $1 if they buy stocks again.

Stock futures trading can also provide the role of shorting stocks for investment.

As far as Niuniu understands, under the Securities and Futures Ordinance, "short selling" allowed by the HKEx means that the seller legally sells the securities without owning a specified securities for short selling, but the seller must first borrow securities from others before he can sell the securities. after selling the securities, the seller must deliver the borrowed securities or borrow the securities on behalf of the sellers to complete the settlement.

This means that when investors sell short stocks, they cannot sell short without stocks. And investors have to pay interest when they borrow shares from others.

When investors predict that a stock is about to plummet, but do not have such a stock, but want to short the stock, stock futures is a good choice. Stock futures are settled in cash. Investors only need to pay a deposit when they sell stocks. They do not need to arrange to borrow shares, and they can also save the cost of borrowing stocks.