A Quick Guide for Futures Quotes

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A Quick Guide for Futures Quotes

Futures trading has a lengthy history dating back to rice dealers in pre-industrial Japan. In that nation, the Dojima Rice Exchange was formed in 1697 to allow individuals to exchange rice futures. Commodity futures were relocated to England, where the London Metal Exchange was established in 1877. However, one of the oldest commodities markets is located in North America. The Chicago Board of Trade (CBOT) was established in 1848.

Futures trading has been an essential element of the investing and trading business since these landmarks. It enables participants to hedge their bets against price changes and also helps in price predictions. Futures trading also contributes to the formation of a global marketplace by bringing essential participants such as consumers and producers together. But what precisely are futures, and how can you understand futures price quotes? Continue reading for a basic primer on understanding futures quotations.

Key Takeaways

  • Futures contracts are sold between two parties in which the buyer promises to purchase a particular quantity of goods from the seller at a predetermined price at a later date.
  • Futures quotes contain the open price, high and low prices, closing price, trading volume, and ticker.
  • Contract codes indicate the contract’s product, month, and year.

What Is a Future?

A future, also known as a future contract, is a financial agreement entered into by two parties—a buyer and a seller. The buyer agrees to buy a particular quantity of merchandise from the seller, such as currencies, commodities, or other financial assets—whatever the futures contract is for—at a predefined price on a future date. At the start of the contract, all of the information is known. Regardless of market pricing, the customer must acquire the goods at the agreed-upon price.

While this is the institutional use, most traders never physically get the item, whether it’s barrels of oil, Japanese yen, or bushels of wheat. Rather, traders win and lose money depending on contract price changes, with most traders closing their position before the contract expires. Understanding a futures price quotation is the first step in learning how to trade futures.

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If you want to trade futures, you must first understand futures price quotations.

Futures trading volume increased by 12% in 2019, hitting 19.24 billion contracts. This is a significant increase from the 12.22 billion contracts traded in 2013.

Futures Quote Information

Most providers will supply many basic pieces of information when seeking for a futures price quotation. This includes the following:

  • Open: The price of the day’s first transaction.
  • High: The contract’s highest price during the trading session.
  • Low: The contract’s lowest price during the trading session.
  • Settle: At the conclusion of the trading session, the closing price.
  • Change: The difference between the current trading session’s closing price and the previous trading session’s closing price. This is commonly expressed as a monetary value (the price) and as a percentage value.
  • 52-WeekHigh/Low: The highest and lowest prices at which the contract has traded in the last 52 weeks.
  • The number of contracts that are open or outstanding.
  • Volume: The total number of contracts exchanged during the session.
  • The physical exchange through which the contract trades is referred to as the exchange.
  • Contract/Ticker: Each futures contract is identified by a unique name/code that describes what it is and when it expires. This is due to the fact that several contracts are exchanged during the year, all of which typically expire.

Most free quotations are at least 10 minutes late. You must have a subscription inside a trading or charting platform, or from a site or service that offers futures quotations, to acquire up-to-date, by-the-second quotes.

Reading a Futures Quote

As indicated above, most sources include quotations that are presented down with figures. Here’s one from the Wall Street Journal.

The corn futures contract, which expires in July 2018, appears at the very top of the chart. It is traded on the Chicago Board of Trade. The current price is shown towards the top, as is the amount the price has moved up or down throughout the day. The quotation also displays the trading volume, the low and high prices for the day—1 day range—open interest, and the high and low prices for the last 52 weeks.

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The price movement over the previous several trading sessions is seen in the graph. The open and settlement prices are shown at the bottom.

Index Futures

Index futures feature price quotations that resemble commodity futures. Let’s take a look at another typical quote: viewing the basic price information for many contracts (with varying expiration dates) in the same future. For example, here is a quotation for E-mini S&P 500 Futures on the Chicago Mercantile Exchange (CME).

The quotation displays basic price information for contracts with varying expiration dates. This quotation is less extensive than the one above, but it still includes the expiration date, last price, change, yesterday’s close/settle, today’s open, high, low, volume, and the Hi/Low Limit.

The exchange determines the Hi/Low Limit. If the price falls below one of these levels (which are usually rather far away), trading will be halted until traders recover their composure and order is restored to the market.

Contracts that are near to expiration are shown at the top of the list, while those that are farther away are displayed lower down the list. One important point to note is that volume tends to be greater in contracts nearing expiration. This is due to traders closing their holdings before the expiration date. Volume moves into the next closest contract once a contract expires.

Contract Codes

In order to comprehend expirations, investors need understand contract codes. Contract codes are made up of one to three characters. These letters are used to identify the product. These are followed by characters representing the contract’s month and year.

The E-Mini S&P 500 contract for June, September, and December is shown in the figure above. While they are listed in the table above, they are not always followed. Instead, “ESM8” or “ESM18” are shown. This translates to: E-mini S&P 500, June 2018.

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The E-Mini S&P 500 is denoted by the symbol ES. Each futures contract has its own ticker symbol. Fortunately, most websites and charting tools allow you to put a name or ticker into the quotation box. Start entering crude oil into a futures quotation box, for example, to bring up an oil futures quote with the ticker CL.

The month comes next. This one is tough since it is code-based.

MonthMonth Code
JanuaryF
FebruaryG
MarchH
AprilJ
MayK
JuneM
JulyN
AugustQ
SeptemberU
OctoberV
NovemberX
DecemberZ

Source: CME Group.

According to the code table above, if you want to trade an E-Mini S&P 500 contract that expires in June, you should seek for one that begins with ESM. ESZ for a contract that ends in December.

You just add the year you want to trade to the year you want to trade: 2020 is ’20’ and 2021 is ’21’, for example. Some websites and applications just use one number at the end, such as ‘1’ rather than ’01’. Remember that the closer the contract is to expiration, the less trading volume it has.

The Bottom Line

It takes some experience to understand a futures price quotation. There is a lot of information and contracts to choose from. The ticker symbol coding is one of the most difficult aspects to master. Because contracts expire, ticker symbols include both the contract symbol and the month and year of expiration. When trading futures, be careful to trade the contract you want, paying close attention to the monthly code.

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