Chapter 2-6 Financial Futures, Symbols, and Codes

Equity Indexes

Equity index futures are the second most heavily traded futures contracts in the world and are available on just about every stock index imaginable.  Equity index futures are always cash settled as the delivery of an entire stock index is simply impractical.  The most heavily traded index futures are the S&P 500, Nikkei 225 (Japan), Hang Seng (Hong Kong), and DAX (Germany).  Of these, the S&P 500 is the world’s most actively traded equity futures contract.  This is because it represents the 500 largest companies effectively allowing investors to buy and sell a diversified portfolio in one contract.  As a result, the S&P 500 serves as a proxy for the broad market as a whole allowing investors to participate in broad market moves without having to look at multiple securities.

S&P 500 futures were introduced by the Chicago Mercantile Exchange (CME) in 1982 with the symbol SP.  The notional value of one S&P 500 contract can be calculated simply by multiplying the futures price by $500.  For example, if the S&P 500 is trading at 1262.20 then the index value would be $631,100; equal to (1262.20 * 500).  Fifteen years later, in 1997, the S&P 500 mini futures contract, symbol ES, was introduced to allow more participants to take place in index futures trading.  The mini S&P contract is the same as the full contract except it operates on 1/5 the scale.

The following chart shows the difference between the full and mini S&P 500 contracts:


Unlike the stocks within indexes themselves, index futures do not stop trading when the stock market closes.  In fact, the S&P 500 futures trade 23.5 hours a day, shutting down from 4:30-5PM for maintenance.  However, holding a contract overnight requires significantly more margin than day trading.  Investors should know the exact margin requirements of your futures broker before placing any trades to avoid margin calls.


Futures trading of equities takes place through instruments known as single-stock futures (SSF’s).  SSF’s are standardized futures contracts in which the underlying asset is 100 shares of a particular stock.  This is reminiscent of how options contracts represent 100 shares of the stocks in which they represent.  However, unlike options, SSF’s represent the obligation, not the right, to buy or sell the underlying shares upon expiration (as with all other futures).  SSF trading takes place on the OneChicago exchange and regulation is handled by the Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC).  Although volume in SSF’s has been increasing ever since they began trading in 2002 they have yet to become significantly popular amongst the derivative trading community.  For the most part, investors prefer the low premiums and greater liquidity provided by the options market.


Trading currency futures has grown in popularity as more and more investors look to expose themselves to fluctuations in the global currency market.  Traditionally, currency futures were used by multinational enterprises (MNEs) to hedge risk exposure when operating in multiple marketplaces.  By locking in exchange rates companies are able to better predict cash flows and ensure a minimum rate of return on goods sold abroad.  These days, as currency trading has become much more popular amongst the investing community, currency futures are being used for speculation more and more.  This is because the margin characteristics involved with trading futures allows investors to reap much higher returns on smaller amounts invested than they would by trading in the spot Forex market.  Currency futures are available on most of the world’s currencies with the EUR/USD being the most actively traded.  Futures trading of currencies in the United States occur on the Chicago Mercantile Exchange (CME).

Interest Rates   

Interest rate futures are financial derivatives in which an interest bearing financial instrument serves as the underlying asset.  The most commonly used underlying assets are debt securities and bank deposits.  Similar to currency futures, interest rate futures were traditionally used by large corporations to protect themselves (hedge) against adverse movements in the interest rates that influence the profitability of the business.  However, interest rate futures trading has become much more mainstream as these instruments have been made more and more available through online investing.

The most heavily traded interest rate futures are futures on US Treasury securities.  These are most often the 10 year note and 30 year bond.  This is because US Treasury securities are widely considered to be risk free debt instruments because they are backed by the US government’s ability to service the debt.  As the world’s largest economy the US has a flawless track record as far as debt service is concerned and thus US Treasuries are the global standard in government debt.  Futures contracts on US government debt, like the securities themselves, move in an inverse relationship to the interest rates they yield.  As yields rise, the futures contracts on bond prices fall and vice versa.  Futures contracts on US Treasury securities represent a notional value of $100,000.

The second most heavily traded interest rate futures are those on interbank deposits.  In the case of US investors, interbank deposits take the form of Eurodollars.  Eurodollars are US Dollar deposits in accounts at banks outside of the United States.  Eurodollar deposits are subject to fluctuations in the London InterBank Offered Rate (LIBOR) and thus Eurodollar futures are a means for investors to expose themselves to this rate.  Eurodollar futures contracts have a notional value of $1,000,000 and trade on a 3 month timeframe.  The price of a Eurodollar futures contract is determined by subtracting the current 3 month USD LIBOR rate from 100.  For example, if LIBOR is currently at 2.50% the futures contract will be worth 97.50.  Every basis point (.01%) is worth $25 in the realized value of a futures contract.  If LIBOR falls from 5.00% to 4.80% an investor who is long Eurodollar futures would receive $500; equal to ((500-480) x $25).  Interest rate futures on treasuries and Eurodollars are both traded on the Chicago Mercantile Exchange (CME).

Futures Symbols and Codes

Futures contracts are generally written so that they expire every three months (quarterly).  Different contracts expire in different months and keeping track of futures expiration can be very confusing.  Furthermore, futures roll over from one contract to another at this point in time, so investors who wish to maintain their positions will need to make a transaction.  It is for this very reason that futures contract codes contain three or four characters that spell out all of this information.  The first one or two (depending on the symbol) identify what the underlying asset is.  The next (either third or fourth, but always the middle) character identifies the month of expiration based on a standardized code.  The final (either third or fourth, but always the last) character is a number that indicates the year in which expiration occurs.

Consider the following chart that depicts the monthly futures contract codes:

Month Code   Month Code   Month Code
January F May K September U
February G June M October V
March H July N November X
April J August Q December Z

Here are some examples of how this comes together with some popular commodity futures:





Contract   Name






Pork   Bellies





Crude   Oil