How To Determine The Current ES Emini Contract Expiration Month

In this article we are going to learn how to determine which ES emini contract is currently active and live on the Globex electronic trading system and WHY it is important. Since index futures symbols change every three months at expiration, new traders can easily become confused and if not careful, find themselves holding a contract through expiration unintentionally. For those individuals using the ES futures as a vehicle for gaining short term profits, holding a position through expiration and settlement is not the desired outcome. So how do we know which contract is current?

S&P 500 ES emini futures contracts expire four times each calendar year or every three months. The months in which they expire never changes and are as follows: March, June, September and December. Initially, this can be very confusing for new individuals entering the futures markets but once the months are committed to memory, it becomes second nature and no longer a going concern. Each month has its own alpha or letter identifier. March is (H), June (M), September (U) and December is (Z).

These letters alone however do not really tell us the whole story since they are only used to identify the expiration month. We need to combine these letters with the current year in which the ES is being traded. For example, if the current trading month is July, 2012 we know the contract now on the Globex electronic system is set to expire in September since it rolled over the previous month of June. The year is added to the symbol and follows the month identifier, in this case the letter would be U followed by the number 12 since it is July, 2012 and we are trading the September 2012 ES contract.

There are several emini futures contracts which represent other index cash markets including the NASDAQ, Dow and Russell exchanges along with the S&P which we are outlining in this article. There must be a symbol which identifies the specific index that is represented by the futures contract, in the case the S&P 500. This index is identified on the Globex system by the letters ES followed by the current contract expiration month and year. So the current contract would be identified by the symbol ESU12.

ES - S&P 500 Emini Futures Contract U - September Expiration 12 - Year of Expiration

The contract letter identifier never changes, only the month and year. Once we clearly understand and have committed to memory the expiration months, knowing which contract is currently trading is easily determined by the using the current month and year.

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Trading Forex With Fibonacci Ratios

Those who are into Forex trading can also make use of the Fibonacci Ratios. The ratios come from dividing any two consecutive numbers in the Fibonacci number sequence to get a mean that is 1.618. This is also referred to as the golden ratio which can be observed in the natural world as much as it is in the trading world. Forex traders have to be aware of the two most important points when they are making trading decisions. These are points 38.2% and 62.8%. However there are also other important points to watch like 75%, 50% and at 33%.

Traders can make use of the Fibonacci ratios to place their stop loss orders. This will prevent them from incurring too much loss in their trading activities especially when they are already trading against a support line. Aside from this, traders are also able to determine the risk that they are taking based on their position size. They are also able to lock in their profits based on the Fibonacci ratios.

In order to benefit from the use of the Fibonacci system in Forex trading, people have to learn how to determine the market trends accurately. They also have to know when the retracements may be expected so that they may know the right trading moves to employ. They can for example buy when they see that the price of the asset is on the support level or they may opt to sell instead if the price in the market in going down.

Forex traders may be able to make use of the Fibonacci ratios through charts where they can plot the support or resistance zones. They have to draw the trend once it has completed a cycle. Traders have to find a completed trend within a given time frame. They need to be able to identify the same trends on the pair of currencies that they are dealing with. Traders have to make use of the charts that they have drawn as guides in making decisions.

When Forex traders see that the price is steadily going up, they may take a long position meaning they can buy the currencies but they have to check diligently as the price approaches one of the Fibonacci Ratios. It is possible for the price to go down and they may lose in their trading transaction if they are not able to sell before this happens. In order to prevent this loss, they need to place an order for a stop loss so that they may be able to save the profit that they have already made instead of losing it. It is also possible that the trends will move the other way and prices move down. In such situations, the Fibonacci Ratios are considered as resistance and traders may exit their positions.

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Choosing the Right CFD Brokers

Unless a person has the time and skills to deal in contracts for difference trading, then direct interactions could be possible. However, most of the investors do not have the luxury to have a closer look to the market and execute whatever things should be done. This is because CFD trading will require a trader to monitor the market closely. It has to be a hands-on method activity. Nevertheless, it is a praiseworthy thing that CFD brokers are here in order to make this transaction possible for busy people.

With the foregoing, a trader cannot just pick anyone to be a broker in their behalf. A reputable and reliable one is a requirement, In this regard, how do you think could a trader assess if CFD brokers are trustworthy, reliable and competent to do the job? There are, in fact, at least three (3) things that any trader should be looking into when it comes to this. These are about the range of asset, experience as well as other terms and conditions.

Asset Range

This is about the range of the assets that CFD brokers can handle. This is extremely significant because not all brokers can handle all assets. There are some brokers that can only handle shares, stocks or indices, which means that they may not be able to handle CFDs on commodities properly. On the other hand, there are also some agents who can specialize more on commodities like gold, crops and many more.

Why Experience Matters?

On the other hand, another crucial aspect that traders need to consider in looking for CFD brokers is their experience. This is because this aspect also tells traders about the expertise of any broker. If they have been in the business for a long time, then this may surpass the technical background of any agent. This is because there are some investors who prefer agents who have a formal education background on finances, specifically contracts for difference.

However, in times when a person does not have any technical education on the subject matter, then this can be substituted by their years of experience. If CFD brokers have been in this business for more than a decade already, then traders can make sure that they already know the nitty-gritty, mechanics as well as rules and regulation surrounding this transaction.

Terms and Conditions

Thirdly, but not the least, the terms and conditions of all CFD brokers should be among the top considerations. This is because it is about how much they will charge on their commission as well as other agreements between the brokers and the primary trader. It is in this light that reading the contract carefully is significant to make sure of this.

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What Is Index-Based CFD Trading?

As its name is suggesting, index-based trading of contracts for difference or CFD is about speculating on the overall performance of the stock market or its sector. This is not the same as trading on shares. This is because the latter has more focus on the stocks of certain and single company rather than the market as a whole. Index, in contrary, refers to the market or sector that comprises of different companies. Hence, what this means is that it will be looking in to the performance of the sector rather than the performance of just a single company.

Among the most common indices where traders can make CFD positions include the FTSE 100, S&P 500 as well as Dow Jones and many more.

In making a position in this form of CFD trading, the trader agrees in exchanging the difference of the price of a certain index from one point or time to another period. In order to understand this, a person needs the basic knowledge on how contract for difference trading works.

With the foregoing, this form of trading means that there are buyers and sellers. The contract or agreement states that the seller will be paying the buyer for the difference. This difference is the disparity between the value of a certain asset at current prices and the contract price. If the said difference is, in contrary, negative; then it means that it would be the buyer needs to pay the seller instead.

Now, applying this to indices, a seller and buyer will have a contract or agreement. If a trader expects the S&P500 index to go down in the coming days, then the right position to take is a "short" position, which means to sell the position. This is because if traders expect it to de-valuate in the coming trading, then the wise investor would dispose it by selling it. However, on the other hand, there would also be some speculations that are in contrary to the former. Some would expect the index to appreciate in the coming days. In this instance, the best thing to do is to take a long position, which is to buy.

In this regard, why would a trader choose this instrument over the others when it comes to CFD trading? The answer to this is quite easy. This is because this instrument allows a trader to have an easy access to unfamiliar market. The best thing about this is that traders can do this without worrying too much on paying clearing fees. Aside from that, most of the main indices are basing on the blue chips, which is an appropriate measure of whatever the sentiments are in the current market. In other words, this means that a trader is primarily investing or positioning on the blue chips rather than a single share.

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"R-C-M-L" in CFD Trading

RCML refers to the four (4) extremely significant things that investors should understand when it comes to trading contract for difference or CFD. These are about its risks, costs, as well as the aspects of margin and leverage. It is in this regard that this article will try to explain these aspects in as layman as possible so that people can comprehend these concepts better.

What are the risks of trading CFDs?

First and foremost, more than the profits and earnings that an investor can benefit from trading in this platform, it is always vital to know the risks of trading these instruments. This is because these are also the factors that will determine whether a trader will earn something or not in the end. For example, even if a trader has the best plan or strategies, it will be futile if they will not take into consideration the risks at all. In other words, they might even fail too if they are not going to account these.

What is the cost of CFD trading?

Secondly, on the other hand, the cost of trading these instruments should also be among the first things that traders must ponder on. The general rule of thumbs suggests that when the costs are too high and beyond the rewards that the traders are expecting, then there is no point in engaging into this in the first place. These costs include the money traders need to spend for opening an account, hiring a broker as well as the capital requirement. Of course, traders must balance the cost with the rewards. There should be more rewards than the cash outflow.

What is margin and how it works?

Thirdly, margin is one of the most basic concepts that investors should understand in this platform. This margin refers to the deposit requirement in order to secure the transaction against those with leverage. This is extremely valuable in order to make the leverage work smoothly. In most trading platforms, the margin requirement is at 5% mark. Hence, this affords the leverage up to a factor of 20. Nevertheless, this rate may still vary, depending on the market condition as well as overall trading climate.

What is leveraging in CFD trading?

Fourthly and lastly, trading in this platform is all about leveraging. This is, in fact, the key element of trading this instrument. Aside from that, this also sets apart this from the other financial instruments out there. This is because it is a fund or capital that traders can use in order to access large transactions in the short-run. Hence, this may have an effect to provide greater capital returns than just trading in ordinary manner. However, traders should not abuse this because this also amplifies the possible losses.

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It Takes High Prices to Fix High Prices and It Takes Volatility to Reach Stability - Philosophy

When you study complexity and chaos you begin to realize that many systems are self-sustaining, close looped, and end up solving their own problems. Any large complex system which is ongoing generally has these characteristics. In fact, we see them all the time in nature. In fact, I've often considered this whole issue of global warming, climate change, ice ages, and warming periods as part of the Earth's cycles. If things move too far in one direction, the pendulum shifts, and things go back the other way. In other words there's nothing to be alarmed about, it is the nature of things.

What type of things you ask? Well, perhaps many more things than you've ever considered. For instance our economy, the jobs market, the stock market, and all sorts of other things as well. How about commodity markets? Okay so, let's talk about that for a moment shall we?

There was an interesting article in the Wall Street Journal on October 4, 2012 titled; "Recent Rise in Natural Gas May Be Smoke," by Spencer Jakab which had an interesting bit of insight;

"Whenever consumers complain about the cost of heating their homes, feeding their families, or driving their cars, commodity traders love to remark that 'it takes high prices to cure high prices'. The same thing works in reverse."

Of course in reverse he was speaking to the glut of natural gas on the market causing low prices due to the new fracking technologies creating abundance, and Matt Damon's new movie aside, these new fracking techniques are astounding at freeing up this energy. Now then, when the prices are too low, producers see no profits, thus, some stop producing and through supply and demand things equal out, and the price comes back to meet the demand curve. So, it seems that the Ying-Yang of commodities and free-markets need little intervention to work their magic.

Since free-markets solve their own problems based on willing buyers and sellers, it seems rather ridiculous for lawmakers, regulators, or consumer groups to demand more price scrutiny. After all, these problems will be solved without intervention, and perhaps much faster as well. Further, price intervention for whatever reason or by whatever scheme only seems to exacerbate the volatility causing even more unintended consequences.

For instance, propping up prices in any way creates a bubble, while scarcity creates a run on that product or service, creating artificial scarcity isn't wise either, nor does it prop up prices long if the market allows new entrants. Price limits or price controls also cause shortages as fewer producers find it worth their while to enter the market to provide those goods and services.

Perhaps, we ought to think twice about voting for any politician who suggests big time intervention in commodity, stock, or free markets. Please consider all this and think on it.

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