Access to Stock market and Exchange traded derivatives means we can easily diversify investments and limit risk to short term trades then switch to under value asset class when opportunity prevails.
I look at price charts for main asset classes in the last 5 years and 12 months in 2020 before making decisions for 2021. You will find selected graphics on from legal bourses like Chicago Merchantile Exchange (CME) regulated by Commodity Futures Trading Commission (CFTC) :
- Stock market indexes with Volatility
- Top technology share prices
- Metals
- Bonds
- Currency
- Cryptocurrency
- Energy
- Agriculture
Legal exchanges enables standard financial contract, clearinghouse that is guaranteed and overseen by regulator, that gives a layer of security to retail participants to view, buy and sell derivatives.
Derivatives
Derivative is a securitized contract between two (or more) parties whose value is derived from one (or more) underlying assets. Its price is determined by bidding and asking prices by buyers and sellers.
Asset can be stocks, bonds, currencies, commodities, or market indexes.
Dow Jones Industrial Average index (DJI) or commonly called, The Dow began in 1885 measures the stock market performance of 30 large companies listed on the United States stock exchange. Its index constituents has change through the years presently includes Apple Inc (AAPL).
Stock Index
DJI in comparison with S&P 500 and Nasdaq 100, in futures derivative form; YM, ES, and NQ.
Technology
Technology stock prices on same price scale with S&P and DJI clearly shows. Can we do better?
What else is there that can top Apple Inc!
How about Tesla Motors (TSLA) ?
Back to asset classes.
Metals
In gold we trust, but how does gold compare to stock index? The next charts uses S&P 500 (ES) which indexes 500 companies that would be more comparative to gold futures (GC).
Gold futures (GC) and Silver futures (SI) is it what you thought it was? Next chart applies SI as candle stick while GC is the orange line, 5 years and 1 year.
U.S. Treasury Bonds 30-years
What about Gold compare to Bonds? The next chart candle sticks are Bond futures (ZB) prices while GC futures takes on orange line, 5 years and last 1 year, on same Y-axis scale.
Bond is a loan taken by company. A debt instrument that matures, with coupon (interest rate or nominal yield), may have tax status (exemption), callability (paid off by issuer before maturity), secured (collateral) or unsecured, liquidation preference (typically gets paid before shareholder) in an event of firm’s liquidation, and affected by bond ratings.
Another instrument that holds value when stock market turn bear is money.
Currency
Dollar Index futures (DX) compares to Gold futures (GC).
How do you think DX compared to ZB ?
Dollar Index futures (DX) is listed on The Intercontinental Exchange (ICE), benchmarked against selected currencies,
- Euro Dollar (EUR),
- Japanese Yen (JPY),
- British Pound Sterling (GBP),
- Canadian Dollar (CAD),
- Swiss Franc (CHF), and
- Swedish Krona (SEK).
Currencies futures are listed on Chicago Merchantile Exchange (CME) FX.
If you hold on to cash or DX compared to stocks (index) (ES) over 5 years:
Dollar Index futures (DX) and Euro currency futures (6E). On 5th January 2021, 6EH1 is 1.229 to USD.
Which do you think will perform better between British Pound Sterling currency futures (6B), Euro Dollar futures (6E) and Japanese Yen futures (6Y) over the last 5 years and 12 months?
Volatility
Invested in stocks means investors has to stomach market volatility which is listed on CBOE as Volatility Index (VIX), Nasdaq futures (NQ) in next chart.
Energy
S&P 500 (ES) compared to Crude Oil futures (CL).
Economy still relies on crude oil, in the last 1 years.
Natural Gas futures (NG) compared to Crude Oil futures (CL) in Energy.
Cryptocurrency
Curious about Bitcoin futures (BTC) compared to NQ and ES.
Agriculture
Corn futures (ZC) and S&P 500 (ES).
Soybean futures (ZS) and Corn futures (ZC).
Soybean Oil futures (ZL) and Crude Palm Oil futures (CPO) 2017–2020.
Micro E-mini S&P 500 index futures (MES) and E-mini S&P 500 index futures (ES) in the last 12 months. MES offer smaller-sized version of E-mini contracts ES. MES (candle stick) and ES (orange line) price move closely.
- MES contract unit is $5 divided into 4 of 1 tick move at 0.25.
- Each 0.25 is valued at $1.25.
- MES requires margin $1,100 or as stated by broker.
- Active contracts are quarterly (Mar, Jun, Sep, Dec using month code H, M, U, Z) listed for 5 consecutive quarters often the nearby contract month has most activity, volume and liquidity.
- Open interest is the total number of futures contracts opened in trade held by market participants at the end of the trading day unlike volume.
- Volume counts all contracts that have been traded, while open interest is a total of contracts that remain open in the market.
- CME Globex active hours Sunday to Friday 6pm to 5pm US Eastern Time (ET) with halt 4:15pm to 4:30pm, if you like to monitor market activity.
- Contracts expires at 9:30 a.m. ET on the 3rd Friday of the contract month, which are financially settled.
For details of settlement procedure and exchange rules can visit CMEgroup.com. Although speculators close their open interest by selling off long position or buy to off-set short position to avoid settlement procedure.
Why MES — because less cash required means less risk. Micro Nasdaq futures code is MNQ, Micro Russell 2000 index futures is M2K, Micro Dow is MYM.
The purpose of this article is to document my findings and not a call for readers to trade or stake money. Eventually I hope to trade with informed situation and should you decide to trade, please understand the market, facts, rules, risks and make the decision with a sound mind and precautions. Practise with paper trade without using real money. Be informed and aware.
Conclusions
> Market comparisons in price charts in last 5 years and 12 months 2020.
> Indexes, Metals, Bond, Currency, Bitcoin, Volatility, Energy, Agriculture.
> Were you surprised by Silver (SI)’s performance compared to Gold (GC)?
> Continue from Economy and Market fundamental review article here.
Follow my articles as I document my learnings to trade and profit in 2021.
