 Hello and good evening everyone, investors and viewers alike with you from TickMill, Ali Ahmed discussing the webinar series over and above what futures are, how they're used in the capital markets and what TickMill has to offer to you as an investor and trader with their futures products. Once again, good evening and I hope everybody is doing well and has had a good week over the last week since we last spoke within their accounts and trading portfolios. Without further ado, we'll get started. We're going to be discussing this evening the expiration dates and obligations, how the expiry dates are calculated, what mechanisms are used and then at the same time what are your obligations as the trader or the investor because this is not an option, this is a futures contract so there are obligations that have to be and must be fulfilled and abided by. As a recap, what we want to do is this is our fifth webinar. As a recap the very first one we went over we discussed what futures are and every single webinar I like to express it again and say that I like to keep the information and the flow of information very informal. I don't like to read directly from the screen, I like to have a conversational so that you can have a more of a dialogue feel of what's taking place and what we're discussing. What futures are, once again they are contracts that obligate an investor or trader to a specific commodity or security or whatever asset class that's available within the futures market to commit to or obligate themselves to that specific price at a future date in time. How are futures used in the capital markets, again you can either be a hedger depending on what type of portfolio you may be managing if it's your own portfolio, a corporate portfolio, an investment portfolio of any sort, you use futures to hedge or protect yourself against any sudden or severe unexpected losses and or speculation. Speculation doesn't need any intro to what that means. How to value what the value is and how to value the tick value in each of the contracts in the futures contracts available because each asset class it's not the same for every single type of asset. The gold tick value is not the same as the S&P 500 tick value and S&P 500 tick value is not the same as the oil etc etc. So understanding we went over that what the size usually per contract we used a couple examples last week where gold as one contract is valued at 100 ounces of gold and what its tick value was and oil is 1000 barrels each contract is equivalent to 1000 barrels with crude oil and then what contracts are traded in the futures market. Last week we also discussed the depth of the asset classes available from the interest rate markets to the agricultural markets to the energy markets to the FX markets to the commodities and metals markets etc etc. I went through the list I showed you the snapshot on on screen you can go to a tick mills website and you could easily look up and see what's available what they have available and they also have available on their website as well the the spec list or the specification list that gives you the value of each tick and contract size and so forth and for this evening again we'll be discussing what the expiration dates mean and what the obligations are to you the investor which you must adhere to as these are mandated coming from the exchange themselves. Okay so these are not made up by a tick mill or anyone else expiry dates if you have ever looked or seen looked at or seen a futures contract you will see for instance crude oil its code is cl and then right behind the cl you will see one of these letters here either an F G H J K M and Q U V X and Z very confusing I know it first but these stipulate which month that particular futures contract is going to expire so we would say cl for instance in December clz 2022 so that way when you're looking at that particular chart or that particular futures contract you know that it's crude oil it's a futures contract because it's got a future date on it with the calendar year now we know also which we'll be able to see further each and every single expiry date is the third Friday of each of these months so if you have a contract that is for instance January with the letter f cl f 2023 then it will be the third Friday in January of 2023 when that expiry date on that contract is due or the obligation of cash settlement takes place futures contracts I just mentioned on the third Friday of each and every single month I gave you that example already now pending on your investment strategy or your portfolio you may need several different or several futures of the same it could be different or the same futures contracts to accommodate your strategy and you will need to layer your contracts accordingly so you don't leave yourself unexpected unexpected unexpectedly exposed so from this angle when I say layer your contracts you can say okay I have a position that I need to protect I'm long or short a specific commodity asset currency whatever it may be and I want to protect myself I want to hedge 50 percent I'm willing to take a 50% loss I don't want to take I don't want to get out of my position but I need to protect myself at least 50% in case something happens unexpectedly unexpectedly and this is what I need to do as time goes by when you have a futures contract you'll realize the profitability and or losses on a daily basis not realize but you'll see them on a daily basis as the market price changes with the underlying asset the thing that gives you a bit of I don't know I don't know if comfort or luxury is the right word but you have the ability to know that you have that contract for its specific amount of time nobody can take that away from you so you can be long or short a specific asset naked without any type of options or futures to help hedge your position and if the market goes up or down regardless whether it's in your favor you're making money if it's not you're losing money but you need to have your strategy in place now this is where the futures come in to help protect your strategy and make you money at the same time while limiting limiting your losses now what happens at expiry or any trading day prior to the expiry date you have the ability to close out that contract and you can close out the contract and it's a cash settlement depending on what the balance is we're going to discuss further what initial margin is and what maintenance margin is in this discussion this evening with the expiry dates so we all get a better an idea of how it would work I'll give you I got some examples for everyone as well but the ability to close out with a cash settlement when you want if you're happy with the profit or the result of what you're looking for but if for any reason you do forget and you let it run it will automatically it will automatically expire on its expiry date and it will settle with it will settle uh uh accordingly with the with the cash position whether it's a profit loss or or gain now let me make the screen a bit bigger this is off of tick mills website and now we're going to get into specific examples what initial margin means and what the maintenance the exchange maintenance margins mean okay so right here I think I've made it big enough I'll make it a little bigger so everybody can see this is right off of the the website from tick mill so you can uh immediately use as a reference but here in this black box here this is the uh New York exchange okay and this is the crude oil remember one contract is equivalent to 1000 barrels uh 1000 barrels of oil and if you were just to we'll get into an example later but do the simple math if you were to buy and purchase a thousand barrels of oil at today's price which is currently trading right now at 101 dollars and 14 cents you would need to dish out 101 thousand dollars in order to take a position in uh one contract of crude oil but with margin accounts the initial the exchange initial margin with NIMEX is 11825 that means you can purchase this one contract take a position with one contract for this amount which is roughly almost 10 percent of the value if you look at it a little less but plus or minus 10 percent and that's what you need to initially be you have to invest and pay to take the position this last column is the maintenance the exchange maintenance margin that means you take a position in this particular contract at 11825 dollars we'll go back to the specifications down and down further in this particular presentation this evening you'll be able to see exactly what i'm referring to so you can calculate the tick value but at any point in time if your account with this particular contract hits the value of 10750 dollars on this contract you will receive a phone call and they will ask you to make a maintenance margin call that you either got to put up more money to keep the position or you can just say you know what go ahead and close it and you close it out for the loss you want to keep it open you've got to feed it you've got to keep that position fed so that you don't keep getting these maintenance margin calls from the exchange these are coming from the exchanges and these are automatically automated and there is no way around them this is why it's obligatory and it's also very very important for you to understand the the the depth and the sophisticated the the this the sophistication dealing with these futures contracts we'll slide it down just a little bit i'm going to get a quick sip of water if you don't mind so you can see here well i'm getting my water i've circled for you also but an e-mini crude oil what its margin is its maintenance margin initial margin this is the initial margin and the maintenance and what e-mini gold looks like excuse me all right so these are also more examples of off of ticker mills website web page what's available get this out of the way and what the initial margin would require and what the maintenance margin level would be okay so here you can see here's an e-mini nasdaq here's an e-mini natural gas and an e-mini s and p 500 which i circled on this particular page there's no reason rhyme or reason i circled these but since these are let's say well known or more well known amongst traders and investors just so that i could bring it out to your attention now further you got the nasdaq you got the e-mini s and p 500 you got the micro gold and you have micro silver and then again you can see here on the far right side what the initial margin would be and at what point or what level would require a maintenance margin call when i say maintenance margin call it's you will receive a phone call or receive notification that hey ali your position with micro your your micro silver position has hit 1900 you what are you going to do you're going to add more money are you going to liquidate other assets to to keep the maintenance margin above its maintenance margin level or do you want to close it out and then you got to give them that decision at that point in time right then and there if your position never ever reaches a maintenance margin call or maintenance margin level period then it's up to you to monitor the level and the the valuation of the contract during the course of its lifespan and you decide when you want to close it and or let it run to expire depending on what your portfolio strategy is all right unless here's an here's an interest rate example with the 10-year treasury note the initial margin and also the maintenance margin call now let me make this a little bit smaller so we can get it all on the screen there we go now but i want i'm going to enlarge it again so you can see these contract specifications don't worry but what i want everybody to understand here uh within your position the cost of the initial margin how much is it going to cost you the investor or trader to take a particular futures contract out on the asset that you want you need to understand the value behind each how the tick value is valued on that specific futures contract you need to understand the exchanges maintenance uh required maintenance uh uh requirement levels the margin levels there just in case things don't move your way immediately they may touch the maintenance margin level which would like i just repeated earlier may require you to add more capital to keep the position or you decide to close it and then the expiry date you've got to understand how expiry dates are important and how they can be layered in several different factors as uh you know you can use a ladder where you can have futures contracts layered out or layered out every three months for expiry that way you're constantly covered um this is not advice this is just strategy to where you can think about your particular position your particular portfolio and depending on whether you're speculating or hedging there are many different ways that you can use uh futures to your benefit and your portfolio's benefit now i'm going to enlarge this so we can look at these specifications there we go so here is crude oil like i said earlier one contract is a thousand barrels the tick value you're looking at one cent and one cent point zero one tick value is equivalent to ten dollars okay so every time now crude oil is trading at 100 spot 78 currently at the moment on my screen that i'm looking at over here it goes up from 100 spot 78 to spot 79 that's ten dollars profit on that particular contract if it goes down to spot 77 that's a ten dollar loss on that particular contract okay the e-mini crude they call it mini because you don't this contract size is only 500 barrels and its tick value is at spot 025 and its value is 12 and 50 cents so every time crude oil itself the price moves spot 025 ticks that's equivalent to a 12 and 50 cent move in your account depending on what type of position you have okay now this is also located on Ticknell's website for you to be able to access and you can look at all the specifications contract specifications available for all the contract sizes uh from for instance uh you have mini gold micro gold you have micro silver mini silver uh crude oil we saw just e-mini oil and you so forth you can see the e-mini s and p 500 the micro s and p 500 and the other products that they have and then you can then start to formulate ah okay this is what my portfolio consists of these are the products that would help either hedge or further speculate to further enhance uh the risk if you will uh further enhance profitability but be mindful of the possible losses as well now initial margin what does this mean you need to understand and this is the the amount of capital that you have to come up with in order to take a position with a specific futures contract depending on which exchange it comes from like I said earlier each exchange has their own rules that we all must abide by as traders and investors this is not anything filtered through tick mill or any other broker dealers that you may have experienced or are dealing with this is mandated through the actual exchange themselves and this requirement will say okay you're going to come in you put in this initial margin you put up the capital you got to be mindful you got to manage that position accordingly and if for any reason that position moves against you and it starts to get close to that maintenance margin level you will receive a phone call and it will say you're getting close just where we're letting you know what do you want to do do you want to keep the position open or if it hits the maintenance margin level do you want to close it if you want to keep it open we suggest that you go ahead and add some funds to your account now or if you're going to close it so be it once it hits the maintenance margin level we'll go ahead and close it out for you that's what the required maintenance margin level is just underneath what I just explained of what the initial margin is and this is the balance in which you will need to either deposit more capital into the position to keep it open or close it out for a loss each exchange has their own required maintenance margins for the futures contracts in which all traders and investors must abide by now we're getting into real life examples so I know I've changed dress to focus on a couple of things here so you can see up here in the upper right sorry upper left corner U.S. oil okay and then this is a CFD on the WTI west tax tax crude oil and this is coming from trading view it but yesterday's time of making the spot price for crude was at 9415 it's trading today it's up 6,042 cents and it's trading at 100 spots 71 at the moment okay this was this is a spot want to go in bro dealer tick mill has their own initial margin requirements maintenance margin requirements etc etc to keep this position open now you want to get into the futures aspect of it here's where I want you to look up in the upper left corner you're going to see right up there the letters C L which stands those are the the abbreviations for crude oil and then you'll see the letter Z if you remember the very first at the beginning of the of the presentation this evening that letter table when I see the letter Z I know that this is the month of December and it's for the year 2022 so and I know that this is a crude oil December expiry of 2022 futures contract it was trading at $90 and 12 cents so what we're going to do now based on these two numbers I've created a real-life example of how about as an investor or trader calculating your profitability and or your loss for this particular position okay so if you were to take out a crude oil one crude oil contract is a thousand barrels and you would have to come up with at the time of this 94 thousand and 150 dollars if you wanted to buy a thousand barrels of oil but with the initial margin you would only have to come up with 11,825 now getting back to here's the contract you would buy the December one at $90 and 12 cents so the tick value if you recall as I was saying is for each spot 01 move in a price of crude oil its valuation is 10 dollars okay so in this example if we use the spot price of 94 15 and we purchase you know what I'm going to go ahead and purchase this future right now December expiry at 90 12 and let's assume that the December expiry comes and the price of crude oil is exactly at 94 15 what's happened to that particular position or this particular futures contract value wise so just doing the simple math that the spot price was the price of expiry how much profit or loss would we have in this particular position it's very simple you take the spot price 94 15 minus your future price which gives you a positive four dollars or four spot 03 and then we would divide that by spot 01 which gives us 403 ticks and we multiply 403 ticks by 10 dollars because each tick value is 10 dollars then in this particular example we would end up with 4030 dollars in profit in my account on this one particular contract alone okay so now you can start to see the depth and and breadth of the volatility that can take place the amount of profitability and or loss that can take place this is very serious so if you look here I charted in earlier presentations as inflationary talk was happening and then the geopolitical tension happened between Ukraine and Russia you can see how it spiked it spiked back down and now it's settling into we don't know what range but it's very volatile at the moment the Fed is coming out saying that there may go up 50 basis points hike and the next meeting so we have to keep that on the table inflation is still getting higher in the states the 25 basis points hike did not do anything to curb or slow down the inflation issue in the United States markets now the cost of raw materials and metals and raw goods is also increasing oil we've discussed it several times and gold several times the volatility based on geopolitical tension but we don't know what's on the table what could happen to you politically if it gets to the point where Russia decides to turn off the taps completely just to show that they can or what if they come up with an agreement they come up with negotiation and settlement and all hostilities stop what will happen then in theory you would think that the price would drop up if you if you think that things were to continue to get worse and worse to the point where Russia turns off the gas and oil pipes to the EU and European nations that it's providing their services to you would think that the oil would spike immediately in theory we would all be correct but we don't should go to have what will happen so this is the speculation part so based on your own portfolio and what positions you have this is a prime opportunity this is a prime market for each and every one of us to understand basically more about what futures are but also not be scared of them once you understand something there's no more fear to be scared of you just have to understand how volatile they can be and know how to use them and there are a perfect security and form of investment to help traders investors this is another example where gold if you look up here gold was trading yesterday gold right now is currently trading at 1979 spot 60 at the time I was making this presentation yesterday it was trading at 1956 spot 90 so it's up a little bit today roughly 30 31 points and if we look at on the upper left corner you'll notice again you'll see the letter Z there you go listen to the letter Z behind GC and then Z there I know that I'm looking at a gold contract and the month Z represents the month of December so it was trading at 1982 so same example as we did in oil if we were to look at say okay gold is trading at 1956 spot and I want to take a take a position to carry it through a futures contract to the through December and the December price is trading at 1982 you know what I'm going to take it so I purchased the December contract at 1982 right this obligates me I'm stuck to this price okay now from now till December it will fluctuate depending on the value of gold of course but let's assume I hold it till expiry date which is the third Friday of December and lo and behold it ends up right back at the same price the spot was when I bought the contract of 1956 what would happen to my position there just like we looked at oil earlier oil would have given you a four thousand dollar profit four thousand thirty dollar profit but if you do the math on this one on this particular exchange the value is the tick value is 0.25 spot 25 is equivalent to twelve dollars and fifty cents so basically you take 1956 spot 90 which is the spot price you subtract your future contract price of 1982 spot 80 which gives you a deficiency or a negative of 25 spot 90 you divide that by spot 25 the tick value and that gives you 103 spot six ticks and you multiply those and fifty cents this particular position would have created if I had gone long one thousand two hundred ninety five dollar loss if I had gone short it would have given me one thousand two ninety five profit same thing for oil we used the long example but if I had gone short it would have been negative four thousand thirty dollars four thousand and thirty dollars so this gives you an idea now we know what the letters mean so you need to know what the symbols are obviously the letters mean which month which year they expire you're going to see a you'll most all the time see a difference between where the actual price of the indices the treasuries the the agricultural commodity the metals gas and oil their actual spot price will be different than the futures contract price because how to take in some factors that we've mentioned before come in on when it can't just time value of money but you're talking about cost to carry insurance manufacturing cost etc etc all of these come into play into the futures contract what are a little smaller what are the key takeaways from this evening's episode one you must everybody needs to know obviously what you are investing and trading within your portfolio you you just you need to know you need to understand and why and know why just is it a trend you see something happening fear of missing out like they call in fomo that's happening with cryptocurrencies all everyone's making money I gotta throw in and next thing you know it's it's almost like a curse as soon as you put in your money into a position because it's been making so much money for everybody else it seems as soon as you put your money into a position bang it goes against you do your research know what you're going to invest in and why or know what you're going to trade and how you're going to trade it and why then going back do your own deal do your own due diligence based on your own research there's a lot of information out there not only over the in all many different social media platforms connectivity platforms and television programs youtube there's just a huge amount of resources available for you to grab information from in order for you to get a better picture of what it is that you want to be involved in make your own assessment you can like how people may be opinionated in one way and how they explain their viewpoint on why they should do this that or the other and you may not like someone else's view or how they say they should do this that the other and you learn you learn how to find what you're more or let's say gravitating towards what type of information you'd like to read and how you understand it and digest it better than others and then you're able to formulate your own idea and your own strategy as to what you think you should be doing within a specific asset class once you've done that then it's very easy for you to say okay here's my strategy boom how can I protect myself the the object of the investment and trading world is what it's to make money it's to it's to make money no one does it to lose money so how can I make money with the least amount of risk and this is where the futures come in the futures contracts come in to help you hedge and this is where you're able to pick and choose what type of information you want after 100 hedge you can have 25 50 75 80 hedge so that if any sudden or unforeseen event or a miscalculation in the actual market some report came came out better or worse off than it was supposed to be and it sends the market into a frenzy you need to make sure that your position is protected so that your objective is to have your portfolio make money and how can you protect it how you can protect it or hedge it using more sophisticated investors and securities like and then once you do that then you'll realize that you're going to need more than one futures contract depending on the size of your portfolio obviously but for the more sophisticated investors and larger portfolios and larger positions that do you need hedging we're talking at the institutional level you know pretty big portfolios they have to have a layer or ladder system of futures contracts in place so that it's not just one futures contract and they're letting it ride on this position it depends because depending on when you're buying and selling if you're buying and holding for the long haul are you buying and selling and day trading during the day so you want to want to hedge yourself during the day then you're going to close out your position and you're not going to keep your futures contract open and over okay thank you okay just for instance you know I think you know I'm looking now S&P right now is trading at 44.32 and I think it's going to close out at the year even though it's down 5% at the end of first quarter of 2022 I think we will rebound and it will end up being 10 percent higher from this point so I'm going to go ahead and contract then you can take one contract and speculate but the more sophisticated your portfolio is the more futures contracts you'll have involved layered in and this is what I mean by layered in with your hedge protocols in case of any sudden or negative event that takes place and I always like to leave with a quote famous quote of the day for this evening the stock market which is pretty fitting for what we just discussed the stock market is filled with individuals who know the price of everything but the okay this is said by Philip Fisher who is an American stock investor back in the day and he was a well-known author for the book common stocks and uncommon profits a guide to investing that has remained in print since it was first published back in 1958 so it's around 60 foot came from which is also adds a little bit more information and resources to what we discussed this evening from the top 100 money quotes of all time that was printed out in November 15th of 2020 and this is another testament to the fact that investing without education and research will ultimately lead to regrettable investment decisions research is much more than just listening to popular opinion and that's exactly what I just ended up on with the key takeaways is knowing what it is that you want to invest and why how to use the futures do your own due diligence not just popular opinion you're not just going to see oh mad money said this is a good hot stock I need to buy it mad money says gold is going to be 3000 but I gotta buy it no you if you just can't be all over the place you got to be disciplined you got to be structured and more you've really got to you don't have to spend all day people like me spent a lot of the time understanding what's taking place in the market but you don't have to spend as much time but you need to be disciplined in the amount of time that you do spend and when you spend becomes a repetitive pattern day by day week by week month by month you will then start to see the difference and reap the rewards and benefits of your discipline based on the research that you do and take the decisions that you choose and you're going to lose some you're not going to win every time you're not going to lose every time either but this is what makes markets and this is what you got to do in order to be successful I'm going to leave it here tonight I spoke a little longer than I usually I hope everybody has a good evening and we have holidays coming up happy Easter to all of those celebrating Easter this weekend and happy Easter we'll be on schedule for next Tuesday inshallah as well so happy Easter for this weekend first I'll go ahead and get out the happy Easter for the following weekend and then after that it will be the coming to the close of Ramadan as well so Ramadan Karim to everyone that is fasting and happy Easter to everyone that is celebrating this weekend and or next weekend and have a safe week in trading the market do good Friday so keep that in mind so we have two more trading days this week uh to uh so if you didn't know that now you do and I'm going to leave it for any last minute questions does anybody have anything that they want to uh ask or share now is the time going once going twice all righty good evening and good luck