Top of main content
A man reading a stock chart; image used in derivatives / future options product

Derivatives / futures and options

About derivatives / futures and options

Derivatives are financial instruments which values are based on the prices of underlying securities, commodities or benchmarks. The most popular derivatives are futures and options, which financial institutions and companies use for arbitrage, risk management and trading purposes. Retail investors can also deploy derivatives for protection and yield enhancement.

HSBC Broking offers trading services covering a comprehensive range of futures and options contracts traded on major exchanges around the world. Our team has rich expertise and proven success in helping sophisticated and experienced investors to execute their investment strategies through the use of derivatives.

Interested in our products? Contact our professional account executives

Futures contracts are derivative instruments. They represent a commitment to buy or sell predefined amounts of underlying assets (e.g. stocks, commodities, currencies etc.) at predetermined price on a specified future date.

Exchange traded futures are standardised futures contracts that are listed in exchanges. HSBC Broking provide services covering major futures exchanges around the world, including the New York Mercantile Exchange (NYMEX), Chicago Mercantile Exchange and the Chicago Board of Trade (CME Group), Intercontinental Exchange (ICE), EUREX and Hong Kong Futures Exchange (HKFE).

Scenario Analysis

Assuming customer buys a contract of Hang Sang Index (HSI) Futures (Oct) at a quote of 23,000. The contract multiplier is HKD50 per index point, and the initial margin and maintenance margin is HKD108,250 and HKD86,600 respectively. Below are examples to illustrate the investment returns basing on different scenarios of HSI futures movement.

3 scenarios of futures

Scenario
Initial open position (HKD)
Initial margin (HKD)
Maintenance margin (HKD)
HSI Future Movement
HSI Future at close
Spread
Realised profit/ (loss) (HKD)
Return on investment (HKD)
1
23,000 x HKD50 (contract multiplier) = +1,150,000
108,250
86,600
No Change

23,000

0 +0
(+0 x HKD50)
N/A
2
23,000 x HKD50 (contract multiplier) = +1,150,000
108,250
86,600
Favourable

23,300

300 +15,000
(+300 x HKD50)

+14%

(+15,000 out of 108,250)

3 23,000 x HKD50 (contract multiplier) = +1,150,000
108,250
86,600
Unfavourable

22,700

-300 -15,000
(300 x HKD50)

-14%

(-15,000 out of 108,250)

3 scenarios of futures

Scenario
1
Initial open position (HKD)
23,000 x HKD50 (contract multiplier) = +1,150,000
Initial margin (HKD)
108,250
Maintenance margin (HKD)
86,600
HSI Future Movement
No Change
HSI Future at close

23,000

Spread
0
Realised profit/ (loss) (HKD)
+0
(+0 x HKD50)
Return on investment (HKD)
N/A
Scenario
2
Initial open position (HKD)
23,000 x HKD50 (contract multiplier) = +1,150,000
Initial margin (HKD)
108,250
Maintenance margin (HKD)
86,600
HSI Future Movement
Favourable
HSI Future at close

23,300

Spread
300
Realised profit/ (loss) (HKD)
+15,000
(+300 x HKD50)
Return on investment (HKD)

+14%

(+15,000 out of 108,250)

Scenario
3
Initial open position (HKD)
23,000 x HKD50 (contract multiplier) = +1,150,000
Initial margin (HKD)
108,250
Maintenance margin (HKD)
86,600
HSI Future Movement
Unfavourable
HSI Future at close

22,700

Spread
-300
Realised profit/ (loss) (HKD)
-15,000
(300 x HKD50)
Return on investment (HKD)

-14%

(-15,000 out of 108,250)

From the above scenario, if the unrealised loss in the contract is equal to or more than HKD21,650 (ie Initial margin minus maintenance margin required), margin call will be triggered1. This can be further translated to a drop of 433 points in HSI Futures as follows.

A table showing sample of unrealised loss

Latest HSI Futures
Spread
Unrealised loss (HKD)
Margin Call
22,567
-433
-21,650
(-433 x HKD50)
Triggered

A table showing sample of unrealised loss

Latest HSI Futures
22,567
Spread
-433
Unrealised loss (HKD)
-21,650
(-433 x HKD50)
Margin Call
Triggered

Margin calls are to be met by customers in order to maintain the position. Any unsatisfied margin calls might be subject to liquidation.

1Assuming the customer only maintains this contract with initial margin of HKD108,250 in his account.

 

To find out more about index futures listed in Hong Kong, please click here

To learn more about stock futures listed in Hong Kong, please click here.

For investor information about futures, please click here [PDF].

For more information on the trading hours in major exchanges, please click here [PDF].

Disclaimer:

This video clip is produced by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”).

All intellectual property rights in and to this video clip are owned and reserved by HSBC. No person may copy, distribute, modify, broadcast, hyperlink or transmit in any way all or any part of this video clip for any purpose whatsoever without HSBC's prior written consent.

This video clip has been created solely for general information purposes, without taking into account any person's objectives or needs. The information contained in this video clip is not professional advice and should not be relied upon by any person.

Neither HSBC Broking Services (Asia) Limited and its affiliates (collectively, “HSBC Broking”) nor HSBC makes any representations or warranties of any kind in relation to this video clip or any part of it. To the maximum extent permitted by applicable law, each of HSBC Broking and HSBC and their respective employees, agents and representatives expressly disclaim all or any liability (whether in tort or contract or otherwise) for any loss, damage, costs or expenses of any nature arising from or in connection with this video clip.

WARNING

Links on this page will exit HSBC Group/HSBC Broking's websites. Please refer to our Hyperlink Policy for further details. HSBC assumes no liability for or control over your use of this link.