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master@miraeasset.com.vn Derivatives 08.02.2022
The overview of Derivatives and how to trade Derivatives on the stock market
CONTENTS
Common derivatives include 4 types:
| Types of Derivatives | Definition |
| Forwards | An agreement between two parties to buy an underlying asset at a pre-determined price and on a pre-specified future date |
| Futures | A standardized forward contract is written by a clearing house that operates an exchange where the contract can be bought or sold. |
| Options | A contract that gives the owner the right, but not the obligation to buy (a call option) or to sell (a put option) an underlying asset at a pre-determined price (the strike price) and on a pre-specified future date. |
| Swaps | An agreement between two parties to exchange cash flows of a financial instrument for a set period |
Derivative products on the Vietnamese market
Currently, a Futures Contract is the only derivative product deployed in Vietnam's stock market.
To help investors get used to new investment tools, in the early, 02 basic contracts have been launched: VN30 futures contracts and government bond futures contracts.
Regulations on derivatives transactions in Vietnam:
| Regulation | |
| Type of contract | Futures contract |
| Margin | Margin at a certain ratio to the value of contracts (this ratio is published by VSD) |
| Payment for gain/loss of positions | Daily or close position |
| Payment method |
VN30 Index futures: cash settlement Bond Futures GB05: cash settlement and physical delivery |
| Definition | Meaning |
| Futures | An agreement between two parties for the purchase and delivery of an asset at an agreed-upon price at a future date |
| Underlying assets | A commodity or financial instrument, a derivative is a financial instrument with a price that is based on a different asset. |
| Margin | Margin in the derivative market is collateral to ensure the payment ability of two counterparties |
| Position | Deal states and the amount of derivatives contract that is owned |
| Close position | Closing a position refers to canceling out an existing position in the market by taking the opposite position |
| Daily Settlement Price | The price of the derivative contract is used to calculate the value of profit/loss arising on the day of each contract |
| Final Settlement Price | The price of the underlying asset is determined on the last trading day of the derivative securities based on that underlying asset, which is used to calculate the value of gain/loss incurred on the last trading day of the contract |
| Multiplier | The coefficient converts the value of the index futures contract into money |
VN30F2010 is as follows:
- Multiplier: 100.000
- Initial margin:13%
- Maturity day: 15/10/2020
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Assuming investor A opens 5 Long position (Buy) VN30F2010 contract for 850 ⇒ Margin value for 5 position = 5*850*100.000*13%= 55.250.000 VND |
✔️ At the end of the session, the market price of VN30F2010 is 860.
- Gain/loss value the customer holds Long position in the session = (860-850) *5*100.000= 5.000.000 VND
- Gain/loss value the customer holds Short position in the session = (850-860) *5*100.000= - 5.000.000 VND
✔️In the next trading session, the investor closed 3 positions at 865, and the closing price was 870
| The customer holds Long position | The customer holds Short position | |
| Gain/Loss from the closed position |
(865-860) *3*100.000= 1.800.000 đ |
(865-860) *5*100.000= -1.800.000 đ |
| Gain/Loss from the open position |
(870-860) *2*100.000= 2.800.000 đ |
(870-860) *5*100.000= - 2.800.000 đ |
| Total Gain/Loss | 8.500.000 | - 8.500.000 |
✔️ At the maturity date, the closing price of VN30F2010 is 865, the VN30 index is 855, and the cost price of the remaining position is 860
- Gain/loss value the customer holds Long position = (855-860) *2*100.000= -1.000.000 VND
- Gain/loss value the customer holds Short position = (860-855) *2*100.000= 1.000.000 VND
Characteristics of futures contracts
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Flexible position: Investors can long when the market is up and short when the market is down. Whether in the uptrend or downtrend market, investors still find opportunities to make a profit in the derivatives market.
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Payment T0: Helps investors can open-close positions in the session, and not be afraid of the risk of the market reversal when the stock has not returned as the underlying market
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High leverage: The advantage of derivative securities is the leverage (from 5 times to 8 times), high leverage corresponds to high profitability
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High liquidity: Liquidity in the derivative market –futures contracts are quite high investors can open positions in large quantities.
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Support Risk management: In addition to using derivative securities for speculation, investors can use derivative securities as a defensive tool for the underlying securities portfolio.
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Open derivatives account |
Have assets at your derivatives account |
Deposit money to VSD for trading |
Get Started |
