ASX 200 futures: what are they and how do they work?

ASX 200 futures are a popular way of locking in the value of the index in advance – whether you think it will rise or fall. Learn more about ASX 200 futures and their trading hours.

What are ASX 200 futures?

ASX 200 futures are contracts in which two parties agree on a set price and date on which to exchange the value of the S&P/ASX 200 Index.

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The index is made up of the 200 largest companies listed on the Australian Securities Exchange (ASX) by market capitalisation.

ASX 200 futures are used by brokers and traders to speculate on the rise and fall of the Australian economy and manage risk in equity markets, by locking in prices ahead of time.

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Futures are also thought to be a useful tool for predicting index movements because they’re traded 24 hours a day. Unlike the index itself, traders can take a position on futures overnight. This means that futures prices can indicate how the stock index might move when the market opens.

How do ASX 200 futures work?

ASX futures work by creating an agreement between a buyer and seller to exchange a certain asset or instrument on a date in the future for a predetermined price.

This allows the buyer to speculate on the direction of an investment without holding the underlying asset.

Let’s say you thought the price of the ASX 200 was going to rise from its current price of 7200. You buy an ASX futures contract, which is valued at AUD 25 per index point. So, your contract value would be £180,000.

As futures are leveraged, you wouldn’t need this full amount, but rather a deposit – known as margin – to open the position.

If the price of the ASX 200 did increase, up to 7300, the contract would now be worth £182,500 and you would’ve made AUD 2,500 in profit. But if the index fell to 7100, it would be worth $177,500 and you’d have lost AUD 2,500.

As ASX 200 futures aren’t based on an underlying asset, but rather a number for the collective group of stocks, they are always cash settled.

When you trade with City Index, you’re speculating on the value of ASX 200 futures with CFDs. If you think the futures price will rise, you can buy the market, and if you think it will fall, you can sell. Your profit or loss will be determined by how far the market moves in your chosen direction.

Like futures, CFDs are leveraged. This means you’ll only need to put down a fraction of the full value of the trade to open the position. However, your profit and loss are based on the full market exposure, which can lead to magnified profits as well as losses.

Most CFD traders will manage this risk using stop-loss orders to automate trade exits.

What are ASX 200 futures trading hours?

Most ASX 200 futures trade from 10:00 to 16:00 AEST when the underlying exchange is open – that’s 00:00 to 06:00 GMT.

However, outside of these hours, futures contracts are priced based on estimates from movements in Dow futures and other global stock indices. This means ASX futures can be traded nearly 24 hours a day.

See our stock market hours

Do ASX futures pay dividends?

ASX futures don’t pay dividends, as you never really take ownership of the shares of companies on the stock index in question.

How to start trading index futures

You can start trading index futures – such as ASX 200 futures – with us in just a few easy steps:

Open a log in if you’re already a customer
Search for the index you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

Alternatively, you can practise trading ASX 200 futures and other assets in a risk-free demo account.

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The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

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StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

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