Gold Futures
Gold Futures is a standardized contract between two parties to buy or sell gold (96.5% purity) at agreed futures price. The investors can take an advantage in making profit according to the gold price expectation in both uptrend and downtrend by trading in Thailand Futures Exchange market (TFEX) and Thailand Clearing House Co.,Ltd. (TCH) will guarantee clearing and settlement for a concerned party. The Securities and Exchange Commission (SEC) will also regulate in TFEX trading. Therefore, the investors can be confident that every trading transaction will be transparent and reliable.
Read more: Margins
Gold Futures Characteristics
Underlying Asset | Buyers and Sellers have authority in setting price. |
Trading Price | 1 Contract is equal to 50 and 10 Baht per Thai Gold Baht. |
Delivery Date | February April June August October and December. The investors can trade in contracts that have delivery date in nearest 6 months only. |
Delivery Method | Cash settlement method with no need of physical delivery. |
Comparison between Gold Futures and Physical Gold
Gold | Gold Futures | |
|---|---|---|
Investment Money | Full 100% Investment money | Invest with only margin valued 10% of contract value. |
Delivery Method | Physical Delivery at gold shops | Cash Settlement Method |
Making Profit Strategy | Make profit in uptrend only | Make profit in both uptrend and downtrend. |
Investment price | Change according to the Gold Trader Association Price (change 1-2 times per day). | Change all time according to trading price in the market. |
Investment Fee | No any Fee but has different cost at 100 baht. | 0.1% of contract value fee but has different cost at only 10 baht. |
Investment Period | Medium and Long Term | Short Term or Day Trading |
Gold Futures Contract Specification
Heading | 10 Baht Gold Futures | 50 Baht Gold Futures |
|---|---|---|
Underlying Asset | Gold Bullion with a purity of 96.5% | |
Ticker Symbol | GF10 | GF |
Contract Size | 10 Thai Gold Baht (152.44 grams) | 50 Thai Gold Baht (762.20 grams) |
Contract Months | 3 nearest even month : February, April, June, August, October, December | |
Price Quotation | Baht per one baht-weight of gold | |
Minimum Price Fluctuations | THB 10 (or THB 100 per contract) | THB 50 (or THB 500 per contract) |
Price Limit | Initial price limit is ±10% from the latest settlement price. Should traded price reach the limit, trading will be halted for a certain period announced by TFEX. After trading resumes, the price limit will be expanded to ± 20% of the latest settlement price. | |
Trading Hours | Pre-open: 09:15 - 09:45 hrs. | |
Last Trading Day | The business day immediately preceding the last business day of the contract month. The trading of expiring contract will be ceased at 16:30 hrs on Last Trading Day. | |
Final Settlement Price | The Final Settlement Price shall be calculated on the basis of the London Gold A.M. Fixing price announced by London Gold Market Fixing Limited on the last trading day and the foreign exchange rate for Baht to US dollar announced by TFEX on the last trading day, after conversion for weight and fineness. The formula for its calculation is as follows: Note:
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Settlement Method | Cash Settlement | |
Pre-Trade Knowledge
Advantage of FUTURES Contract
Buyers and Sellers have authority in setting price.
No need of physical delivery but use cash settlement method instead.
Use less investment money but make more profit.
ทAble to make profit in both uptrend and downtrend.
Able to trade by the investor self via internet trading.
There will be Marketing Officers (Brokers) to help in providing information for investment and following the market situation for the investors.
Margin Deposit in Futures Contract
Investors are required to deposit Margin with their respective broker before trading futures contract and there are following 3 types of margin.
Initial Margin (IM)
is the minimum equity required to initiate a futures position and equal to only 10% of underlying asset’s value.
Maintenance Margin (MM)
is a set minimum margin per outstanding futures contract that a customer must maintain in their margin account and equal to 70% of contract value.
Force Close (FC)
is the case when the margin level decrease to Force Close Margin Rate or 30% of contract value, the brokers have rights to close the account to cut loss instantly unless the investors can deposit additional funds to meet Initial Margin requirement within 1 hour.
Mark-to-Market
Date | Transaction | Closed Price | Profit/Loss | Transferred In/ Transferred Out | Margin Amount |
|---|---|---|---|---|---|
03/02/2009 | Buy Gold Futures at 15,000 baht | 70,000 baht | |||
Profit/loss adjustment | 15,080 baht | 4,000 baht | 74,000 baht | ||
04/02/2009 | Profit/loss adjustment | 14,800 baht | -14,000 baht | 60,000 baht | |
05/02/2009 | Profit/loss adjustment | 14,500 baht | -15,000 baht | 45,000 baht | |
06/02/2009 | Deposit additional margin | 25,000 baht | 70,000 baht | ||
Sell Gold Futures at 15,050 baht | 27,500 baht | 97,500 baht |
3 Feb
Mr. A buys gold futures at 15,000 baht for 1 contract. After the price is at 15,080 baht, the market will Mark-to-Market to calculate profit/loss by comparing between closed price and buy price 15,080 -15,000 = profit 80 baht X 50 (1 gold futures contract is equal to 50 baht). Therefore, Mr. A will get profit 4,000 baht and whole margin amount is equal to 74,000 baht.
4 Feb
The price is lower to close at 14,800 baht. The calculated profit/loss is equal to 14,800 – 15,080 = (280*50) or loss 14,000 baht and the margin amount is equal to 60,000 baht.
5 Feb
The price is lower to close at 14,500 baht. The calculated profit/loss is equal to 14,500 – 14,800 = (300*50) or loss 15,000 baht and the margin amount is equal to 45,000 baht. Therefore, Mr. A is required to deposit additional margin 25,000 baht within the next day.
6 Feb
The price is lower to close at 14,500 baht. The calculated profit/loss is equal to 14,500 – 14,800 = (300*50) or loss 15,000 baht and the margin amount is equal to 45,000 baht. Therefore, Mr. A is required to deposit additional margin 25,000 baht within the next day.
