How do you know what’s going on in the market every day? How do you know what sectors are moving? How do you know the market is up or down? If you are answering these questions by saying, “I go to Yahoo Finance on my ride home”, we have a problem.
Before we dig into this post, I want to make this very clear beforehand. This post is incredibly important. At the end of this post, we will be creating a watchlist that you could and should watch all day every day that is a combination of the most active futures. We will get into detail about each of these most active futures and explain why this watchlist is so important to follow.
First for a little speech…
I am here to tell you, that there is something that separates those who make money in the market to those who do not. The answer is engagement. The more engagement, the better.
Jeff the investor reads Yahoo Finance on his way home from work every day. He reads all of the articles from the “expert” contributors who are journalists, not investors. He reads up on what happened that day in the market and why it happened. Based off what Jeff reads, he could potentially call his broker to make a trade for himself for the following day or maybe place an order for himself pre-market the next morning. Sometimes, positions go against Jeff. He loses his mind and tries to cut his losses. Jeff is an example of 95% of the people who participate in the market.
Steven, on the other hand, has the market up on his screen all day. He becomes very familiar with price movement. He does not read the news because he knows price doesn’t lie. He has alerts set up when certain stocks move a certain amount outside of their expected ranges. Steven is used to losses as he has and is in the mix all day every day. He sees things as they happen and doesn’t need a journalist who does not trade to give him his opinion. Steven is an example of about 1% of the people who participate in the market.
There is a very good argument to be made that Steven is far more engaged in the market when compared to Jeff. Jeff is probably a very nice person, but Steven will always have the advantage over Jeff because he is more engaged. He has more experience. He has logged much more time. He becomes more in tune with the market. He is used to seeing small and large price movements and PnL swings. He can see how markets move and how different sectors correlate to one another.
If you truly want to be successful in the markets, it will require engagement on your part. While a bull market solves all problems, those same bull markets do not last forever. Jeff likely does well during those bull market years and brags to his dentist friends about how well he is doing in the market. Steven, on the other hand, is a grinder. And when the market corrects, and it always does, Jeff will be blindsided and Steven will not. When opportunities arise (because we ONLY care about opportunity and do NOT care about risk), Steven will be able to jump on it faster (and know what it looks like) where Jeff will not. This is where you need to be.
Most Active Futures For Your New Watchlist
Remember, a very large theme we have here at StonyBrookSecurities is the concept of liquidity. Products that we deem liquid have the most volume thus, the most eyeballs and attention. Futures contracts, as described by the video below, have incredible amounts of liquidity. Futures move first.
Let’s go ahead and start compiling our list of futures contracts to add to our new watchlist of the most active futures. Being able to have this watchlist up at all times will allow us to get a very quick gauge of the market without having to dig into hundreds of individual stocks.
S&P Futures (/ES)
The S&P futures also known as the S&P Emini futures are the most liquid product in the world. The movement in the S&P futures can give us a quick snapshot of what is going on in a majority of the stocks in the S&P 500. Want liquidity? To find the notional value of each contract we take the tick size (minimum price movement) which is equivalent to $12.50 and multiply it by how many ticks per dollar or in this case 4. $50 per point time 2360 (the current price) and we get $118,000 per contract of notional value. Better yet, today the S&P futures trade 1.64 million contracts which would mean the total notional value traded today in the S&P futures was $118,000 * 1,400,000 = 165,200,000,000 (165.2 BILLION). That my friends is liquidity.
Nasdaq 100 Futures (/NQ)
The Nasdaq 100 futures give us a glimpse into what is going on in the tech world on a given day or Apple, Google, Facebook, Microsoft, and Amazon. This contract is also very liquid. To find the notional value of each contract we take the tick size which is equivalent to $5 and multiply it by how many ticks per dollar or in this case 4. $20 per point times 5345 (the current price) and we get $108,700 per contract of notional value. Today, the Nasdaq 100 futures traded 180,000 contracts which would mean the total notional value traded today in the /NQ was $108,700 * 180,000 = 19,566,000,000 (19.5 BILLION). Very liquid.
Russell 2000 Futures (/TF)
The Russell 2000 futures tell the tale of the small cap stocks. To find the total notional here we take the tick value ($10) times how many ticks in a full point (10) and get $100 per point. The Russell 2000 futures are currently trading at $1407 which makes the notional value of the Russell 2000 futures $140,700. That is larger than the /ES. How much notional traded today? $140,700 * 103,000 (contracts traded today) = 14,492,100,000 (14.5 BILLION).
VIX Futures (/VX)
The VIX futures are a representation of true volatility. Not like the cash settled $VIX, the /VX futures tell the real story of volatility. Hey, the $VIX is based off the /VX so this should be the only one we care about. This is quite a big contract as each tick is $50 and there are 20 ticks per point. Each point is then worth $1000. We take that times the current price of 13.20 and we get $13,200. Now obviously the notional size is much smaller than the index futures, however, $50 a tick is very big. How much traded today? 133,000 so the total notional traded here today was $13,200 * 133,000 = 1,755,600,000 (1.756 BILLION).
30 Year US T Bond Futures (/ZB)
The 30 Year US T Bond futures are known as the Bond Market. These bad boys are also a yuge contracts. Each tick is worth $31.25 and there are 32 ticks per point making each point worth $1000. 151’02 is the current price for the 30 Year US T Bond future making the notional value ($1000*151) + (31.25*2) = $151,062.50. Big contract. With 290,000 contracts trades today the total notional trade was $151.062.50 * 290,000 = 43,808,125,000 (44 BILLION).
Crude Oil Futures (/CL)
Crude oil futures represent the energy market and specifically the crude oil market. These guys whip around like they are going out of style. Each tick is worth $10 and there are 100 ticks in a point making each point worth $1000. With a price of 54.51, the total notional value of the Crude Oil futures contract is $54,510. With 640,000 contracts traded today, the total notional size was $54,510 * 640,000 = 34,886,400,000 (35 BILLION).
Euro Futures (/6E)
Euro futures start to get us involved in the currency world as the Euro futures are a representation of the European markets. The tick size for the Euro futures is $12.50 and there are currently 10556 ticks in the contracts (currently trading at 1.05560. Add those up and we get $12.50 * 10,556 = $131,950 as the notional value for the Euro futures. With 245,000 contracts traded today the notional size of the Euro futures market today was $131,950 * 245,000 = 32,327,750,000 (32 BILLION)
Gold Futures (/GC)
Gold futures give us a glimpse into the precious metals market as well as what stocks that are closely correlated to gold and precious metals are doing. It is $10 a tick for gold futures and there are 10 ticks in a point. With the current price of gold futures trading at $1238.2, the current notional value a gold futures contract is $100 * 1238.2 or $123,820. With 250,000 contracts traded today, the total notional today was $123,820 * 250,000 = 30,955,000,000 (31 BILLION)
Dollar Futures (/DX)
The US Dollar futures give us another glimpse into currencies and the strength of the US dollar will 100% impact the strength of every other currency in the world as everything is pegged against the US Dollar. $5 a tick here and 200 ticks per point making each point worth $1000. With a price of $101.25, the notional value of a US Dollar futures contract is $101,250. With 28,000 contracts traded today the size of the US Dollar futures market today was $101,250 * 28,000 = 2,835,000,000 (2.8 BILLION).
Natural Gas Futures (/NG)
The natural gas futures give us another glimpse into the energy markets. With a $10 tick size and a price of $2.576 we have a notional value of $25,760. With 200,000 contracts traded today, the total notional value of the nat gas futures market was $25,760 * 200,000 = 5,152,000,000 (5 BILLION).
Your New Most Active Futures Watchlist
And here you have it. You get an instant glimpse into the most liquid products in the world that will keep you engaged while at the same time giving you insight into the equity, volatility, bond, currency, and energy markets. Everything you might ever want to trade is in some way heavily correlated to one of these most active futures contracts. Find the correlation then take note. We don’t need charts. We just need numbers and to be engaged. Now you are going to be more engaged than ever.