Quick Guide to Futures Quotation

The futures market has a long history, dating back to the Japanese rice traders before industrialization. The Dojima Rice Exchange was established in the country in 1697, so people can trade rice futures.Commodity futures were transferred to the United Kingdom, and the London Metal Exchange was formally established in the United Kingdom in 1877.However, one of the oldest commodity exchanges happens to be in North America. This is the Chicago Board of Trade (CBOT), which was founded in 1848.

Since these milestones, futures trading has become an important part of the investment and trading industry. It allows participants to hedge their bets against price fluctuations and is also helpful in price prediction. By bringing together key players such as consumers and manufacturers, futures trading can help create a global market. But what are futures, and how do you read their quotes? Read on to see our quick guide on how to understand futures quotes.

Key points

  • Futures contracts are traded between two parties, and the buyer agrees to purchase a specific quantity of products from the seller at an agreed price on a certain date in the future.
  • Some of the characteristics of futures quotes include opening price, highest and lowest prices, closing price, trading volume, and code.
  • The contract code identifies the product, month, and year of the contract.

What is the future?

Futures, also known as futures contracts, are financial contracts between buyers and sellers. The buyer agrees to purchase a specific quantity of products, such as currency, commodities, or other financial assets, from the seller at a specific price on a predetermined date in the future—regardless of the futures contract. All information is known at the beginning of the contract. Regardless of the market price, the buyer must purchase the product at the agreed price.

Although this is an institutional application, most traders never make physical delivery of assets, whether it is barrels of oil, yen or bushels of wheat. On the contrary, traders make money and lose money based on the price fluctuations of the contract, and most traders choose to close their positions before the contract expires. The first step in being able to trade futures is to understand futures quotes.

If you want to trade futures, it is imperative to understand futures quotations.

In 2019, futures trading activity increased by 12% to 19.24 billion contracts. This is a significant increase from the 12.22 billion contracts traded in 2013.

Futures quote information

When looking for futures quotes, most sources will provide a few basic pieces of information. This includes:

  • Open: The price of the first transaction of the day.
  • High: The high price of the contract during the trading session.
  • low: The low price of the contract during the trading session.
  • settle down: The closing price at the end of the trading session.
  • Change: The change between the closing price of the current trading session and the closing price of the previous trading session. This is usually quoted in the form of dollar value (price) and percentage value.
  • 52 week high/low: The highest and lowest price of contract transactions last year.
  • Open position: The number of outstanding or unfinished contracts.
  • volume: The number of contracts that changed hands during the transaction.
  • exchange: The physical exchange for contract transactions.
  • Contract/code: Each futures contract has a specific name/code to explain what it is and when it expires. That’s because there are multiple contract transactions throughout the year-all contracts usually expire.

Most free quotes are delayed by at least 10 to 20 minutes. If you want to get the latest quotes calculated by the second, you need to subscribe in a trading or charting platform, or subscribe from a website or service that provides futures quotes.

Read futures quotes

Most sources provide quotes with numbers as shown above. This is an example of the Wall Street Journal.

The top one is the futures contract, which is corn. This particular contract expires in July. It is traded on CBOT.Near the top is the current price, and the magnitude of the price increase or decrease that day. The quotation also shows the trading volume, the day’s lowest and highest price (1 day range) open positions, and the highest and lowest prices for the past 52 weeks.

The graph shows the price trend of the past few trading days. The bottom is the opening price and the settlement price.

Index futures

The quotations of index futures are similar to commodity futures. Let us look at another common quotation, that is, to view the basic pricing information of multiple contracts (with different expiration dates) in the same future. For example, the following is a quote for E-mini S&P 500 futures traded on the Chicago Mercantile Exchange (CME).

The quotation shows basic pricing information for contracts with different expiration dates. This quotation is not as detailed as the above, but still provides expiration date, last price, change, yesterday’s closing/settlement, today’s opening, maximum, minimum, volume and high/low limits.

The upper/lower limit is the threshold set by the exchange. If the price moves to one of these levels (they are usually far away), trading will be suspended, so traders can regain their composure and the market can restore order.

Contracts that are close to expiration are displayed at the top, while contracts that are farther away are displayed at the bottom of the list. One of the main things to note is that the trading volume of contracts nearing expiration tends to be higher. This is because traders close their positions before expiry. When the contract expires, the trading volume will enter the next closest contract.

Contract code

Investors should understand the meaning of the contract code to understand the expiry date. The contract code is configured to be one to three characters. These letters identify the product. These are followed by characters representing the month and year of the contract.

In the chart above, the E-Mini S&P 500 Index lists contracts for June, September, and December. Although these are detailed in the figure above, they are usually not. Instead, “ESM8” or “ESM18” is displayed. This means: E-mini S&P 500, June 2018.

ES is the stock code of E-Mini S&P 500.Every futures contract has a stock code. Fortunately, most websites and charting platforms allow you to type a name or stock code in the quote box. For example, start to enter crude oil in the futures quotation box to display oil futures quotations, the code is CL.

Next is the month. This is tricky because it is based on code.

moon Month code
January F
February G
March H
April J
possible Potassium
June rice
July N
August ask
September you
October Volt
November X
December Z

Source: CME Group.

From the code table above, you can see that if you want to trade an E-Mini S&P 500 contract that expires in June, you will be looking for a contract that starts with ESM. For contracts that expire in December, ESZ.

For the year you want to trade, you only need to add the year you want to trade: for example, 2020 is “20” and 2021 is “21”. Some websites and software only use a number at the end, for example, one instead of “01”. Remember, the farther the contract is from the expiry date, the less trading volume it usually has.

Bottom line

Understanding futures quotes requires some practice. There is a lot of information and a lot of different contracts. One of the trickier things to get used to is the stock code encoding. As the contract expires, the stock code contains the contract code and the month and year of expiration. When trading futures, please make sure you are trading the contract you want, paying special attention to the monthly code.

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