Assignment 1:
Learning How to Look Up Quotes and Contract Specifications and Learning About DOM Futures Trading

1. Go to the New York Mercantile Exchange web site.

On a sheet of paper, answer the following questions about gold futures contracts:

  1. What is the trading symbol for  futures contracts?
  2. What is the contract size ("unit of trade")of a gold futures contract?
  3. What are the non-member speculative margins for initial margins and maintenance margins? [Note: Initial margin must be met to open the contract, maintenance margin must be maintained as the account is adjusted each day].
  4. What is the price quotation unit (monetary unit per weight)?
  5. What are the delivery conditions?
  6. What are the grade and quality specs that must be satisfied if the gold is delivered?
  7. Look up the quotation for the settle price for a delivery contract scheduled for delivery one year from this month.

After you have answered all of these, calculate the following:

 

  1. Using the quotation from the answer to question 7, what will be the full value of the contract (the contract size times the settlement price)?
  2. Compare the answer to question 8 to your initial margin. What is the leverage multiple (contract value / initial margin) for this contract?

 

2.  Now go to the International Exchange (ICE) web site. Under the European futures market find the ECX Certified Emissions Reductions CFI. Select that, then select the link for the ICE ECX CER Futures contract specs (a pdf file will come up). What is being traded here and, so far as you can tell, for what reason?

 

3.  Now go to the OpenECry site. Do the following:

 

  1. The Depth of Market feature used at futures trading sites in similar in structure to the NASDAQ Level II quotation structure for stocks. You need to see an example of how it works and what it looks like. To do this on OpenECry, click on video tutorials on the left menu. On the resulting page, watch the first four tutorials, starting with DOM Overview and ending with Opening a DOM (you can also review the fifth tutorial if you want, but it covers material that is more advanced than we need to know right now).
  2. You can also use OpenECry to review all available contracts, their symbols, initial margins, and contract specs. To do this, select tab Trader’s Toolbox, then contract information. There you will have access to margin requirements and contract specifications. Note the Monthly Symbols at the top of the page. Peruse these contracts. Find the CME Copper contract. What size is the contract and what are the initial and day margins?
  3. Although I do not require this, you might consider downloading OpenECry’s demo software and playing with it. It is especially useful for seeing how the DOM works. The demo download is under OEC software under Simulated Trading.

 

 

Although I will answer questions about this material, I will not review it in class. This is homework designed to allow you to learn on your own.

There will be an examination question asked about this homework. To prepare for the exam, review your answers to the questions above.


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