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Wednesday, February 28, 2024

Eurex Index Futures: A Liquid Global Marketplace

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Stock traders, investors, and hedgers have long known the value of stock index futures. Traders can access exposures to an entire country’s equity markets or a specific sector within it through various stock index futures benchmarks.

Just as an investor can access the broad U.S. market through various iterations of the S&P 500 futures, the largest blue chip stocks through the Dow Jones futures, or the technology sector through the Nasdaq 100, market participants can access many European and global equity benchmarks through Eurex’s family of stock index futures.

Eurex is the leading European derivatives exchange and clearing firm. It offers market liquidity, efficiency, and integrity by providing customers with innovative solutions to seamlessly manage risk. Through its derivatives exchange and clearing arm, Eurex has pioneered products and infrastructures, offering a broad range of international benchmark products and featuring open and low-cost electronic access.​

Eurex Indexes

Eurex offers an all-encompassing suite of global, regional, and thematic stock indexes that enable traders to diversify their investments or gain additional exposure to specific areas of their portfolio. With its integrated clearing, cross-margining, and a massive pool of products and liquidity, Eurex offers a single point of entry into a sea of liquidity, providing operational and financial efficiency. Eurex’s benchmark indexes are among the most liquid exchange-traded derivatives and attract a global network of market participants.

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These indexes include the following products and product families.

DAX® futures

The DAX® Stock Index represents Germany’s largest 40 stocks. Eurex offers the DAX® Index Futures (FDAX), a Mini-DAX® (FDXM) that is one-fifth the size of the large contract, and a Micro-DAX® (FDXS) that is one-fifth the size of the Mini.

In addition to futures and options on the DAX® with various risk thresholds, Eurex offers futures on its mid-cap index (MDAX). The index tracks the performance of the 50 stocks that follow DAX® companies in terms of size or that are not eligible for DAX® inclusion. The Mini MDAX futures (FSMX) have a tick value of €1, so it’s more aligned with the Micro-DAX® than the Mini.

Retail traders can hedge exposure to mid-cap companies or make a bet on the mid-cap sector versus large caps by spreading the FSMX with the FDXS.

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Eurex also offers futures on its TecDAX Index, which includes the 30 largest companies classified as belonging to the “technology” sector and that fulfill minimum quality requirements. The tick value of the TecDAX futures (FTDX) is €5. Traders can access the technology sector or split that sector off (or double up) by trading it versus the Mini or Micro-DAX®. Eurex also offers futures on its sustainability index DAX® 50 ESG.

EURO STOXX 50®

The EURO STOXX 50® is an index of the largest 50 stocks in the Eurozone, and the EURO STOXX 50® Futures (FESX) is the Eurozone’s benchmark stock index.

The EURO STOXX 50® Index Quanto Futures (FESQ) is identical to the highly liquid EURO STOXX 50 Index Futures (FESX), with the exception that it trades in U.S. dollars. Both contracts expire at the exact same index level on the third Friday of March, June, September, or December.

Eurex has launched Micro EURO STOXX 50® futures that trade at 1/20 the gearing of the large contract (see specs below).

The STOXX® Europe 50 Index Futures (FSTX) is a contract based on an index of the largest 50 companies in Europe. This index included companies based in the United Kingdom.

The EURO STOXX 50® ex Financials Index Futures (FEXF) follows the same protocols as the EURO STOXX 50® but excludes financial sector stocks.

Eurex also lists 23 separate sector-specific index futures.

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Contract values and price gradations:

Contract Contract Value Minimum price Change
Points Value
EURO STOXX 50® Index Futures EUR 10 1 EUR 10
Micro EURO STOXX 50® Index Futures EUR 10 0.5 EUR 5
EURO STOXX 50® Index Quanto Futures USD 10 1 USD 10
EURO STOXX 50® ex Financials Index Futures EUR 10 0.5 EUR 5
STOXX® Europe 50 Index Futures EUR 10 1 EUR 10

 

FTSE 100 Product Suite

Eurex lists futures on FTSE 100 Index (FTUK). The FTSE 100 is a stock index of the largest stocks listed on the London Stock Exchange based on market capitalization. It also lists futures on a declared dividend FTSE 100 Index (FTDD) and the FTSE 100 Total Return Index (TTUK).

MSCI Indexes

MSCI indexes are some of the world’s most widely tracked benchmarks and linked to more than $16.3 trillion in assets under management. The indexes also serve as the basis for over 1,300 Exchange Traded Funds (ETFs). The massive amount of capital benchmarked against MSCI indexes and the improved tradability of index-based products via ETFs has led to an increased need for futures and options. MSCI derivatives help managers facilitate in and outflows of funds, hedge existing equity exposure, and enhance portfolio performance.

Eurex is the only exchange offering a comprehensive suite of products consisting of futures and options on regional and country indexes. Currently, 160 MSCI futures and 32 MSCI options are available, covering emerging and developed markets in different index types and different currencies (EUR, USD, GBP, and JPY).

Trading Liquid Markets

Although the universe of index futures offered through Eurex is extremely broad, the core markets suitable to retail traders include the Mini and Micro-DAX® suites of products as well as the Micro-EURO STOXX 50®. More sophisticated traders can look into the FTSE products and the sector-specific EURO STOXX futures.

“These are all tremendous products,” says Dan Gramza, President of Gramza Capital Management, who is a trader and consultant to domestic and international clients. “They truly provide the opportunity to diversify exposure outside of the United States.”

A key to utilizing these products—both in terms of market trends and in relation to their impact on U.S. markets—is identifying when these products lead or lag the U.S. marketplace, according to Gramza. “The amount of lead or lag can provide a unique opportunity for trade entry. The lead or lag can be defined in terms of magnitude of change as well as time,” Gramza says. “The trading techniques that you would utilize for U.S. domestic indexes can apply to these markets. The reason for this is, in general, these markets tend to follow the same rhythm which means indicators that are being used on U.S. domestic indexes will also work on these European products.”

Of course, trading Euro-based financial markets means you must understand the fundamental factors and economic reports that will have an impact on these markets.

Anyone trading U.S. financial markets understands the importance of knowing when major economic reports are released. The U.S. employment situation report, GDP, and Consumer Price Index all can cause major disruptions in U.S. based stock indexes or Treasury futures. This is particularly true for short-term day or swing traders who are less able to withstand a short-term volatility spike. These traders should probably be flat going into these reports. Even longer-term traders need to know the market expectations of these reports to manage their trades.

Anyone trading any of these euro-based stock indexes needs to familiarize themselves with the German- and European-based indicators that can have an impact on markets. The StoneX calendar is a good resource for important events that could impact DAX® and Euro Stoxx futures or any market you are trading.

Eurex offers a broad and liquid group of stock indexes that offers opportunities to create alpha and diversify your trading. Gramza notes that the best time to trade the DAX® and EURO STOXX 50® is typically during the first two hours of the Eurex trading session and the last two hours because both periods often offer the greatest liquidity and volatility.





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