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TRANSCRIPT
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Trading Index Futures on the JPX Market- An Introduction to TOPIX and the N/T Ratio Trade -
December, 2013 Tokyo Stock Exchange
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What is TOPIX?
1. Representative index of Japanese stock market 2. Includes all stocks listed on TSE 1st section
1,722 of the biggest, most liquid stocks
562 stocks
185 stocks
1st section
2nd section
Mothers882 stocks Jasdaq
3. Market capitalization-weighted index expressed in points
0
500
1000
1500
2000
2500
3000
Dec. 18, 1989: 2884.8 pts. Nov. 15, 2013: 1239.04 pts.
Jan. 1, 1968: 100 pts.
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How is it different from the Nikkei?
11.9%
11.6%
10.4%
6.8%
5.6%5.0%4.5%
4.4%
4.4%
4.1%
31.3%
Other
16.8%
12.6%
11.0%
7.9%6.5%
6.1%
4.7%
4.6%
3.4%
3.2%
23.2%
Other
TOPIX: Nikkei 225:
1722 Market Value Weighted Stocks 225 Price Weighted Stocks
Tokyo Stock Exchange Nihon Keizai Shimbun
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How do the methodology differences affect price movements?
Formula:
Big Movers: High market cap stocks (Toyota, MUFG, etc.) High price stocks (Fast Retailing, Kikkoman, etc.)
TOPIX Nikkei 225
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
0
200
400
600
800
1000
1200
1400
1600
1800
2000
11/21/2003 11/21/2004 11/21/2005 11/21/2006 11/21/2007 11/21/2008 11/21/2009 11/21/2010 11/21/2011 11/21/2012
TOPIX (Left Axis) Nikkei 225 (Right Axis)
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Playing the difference between TOPIX and N225 : the N/T Ratio Trade
and/or+ N- T and/or
- N+ T
N/T N/T
Nikkei/TOPIX Ratio
8.00
8.50
9.00
9.50
10.00
10.50
11.00
11.50
12.00
12.50
11/21/2003 11/21/2004 11/21/2005 11/21/2006 11/21/2007 11/21/2008 11/21/2009 11/21/2010 11/21/2011 11/21/2012
Nov. 15, 2013: 12.24
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TOPIX Futures (Large)
TOPIX Futures (Mini)
Nikkei 225 Futures (Large)
Nikkei 225 Futures (Mini)
9:00~11:3511:45~15:1516:30~23:30
9:00~11:3511:45~15:1516:30~23:30
9:00~15:1516:30~3:00
9:00~15:1516:30~3:00Trading Times
Index value×\10,000
(around \12.4M)
Index value×\1,000
(around \1.24M)
Index value×\1,000
(around \15.2M)
Index value×\100
(around \1.52M)Contract Size
0.5 points(\5,000)
0.25 points(\250)
10 yen(\10,000)
5 yen(\500)Tick Size
\360,000 \36,000 \480,000 \48,000Required Margin(as of Nov. 1, 2013)
How do I trade it?
A short primer on JPX Futures
Mar. 24, 2014
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Trading the indices
I think that N/T’s going UP in November
Sell TOPIX Futures Buy Nikkei 225 Futures
Let’s walk through an example of an N/T trade:
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Trading the indices
TOPIX Nikkei 225
Include Mini
\14,190,000Total Contract Size:
\30,000 difference is your total exposure to N225
However:
Large Contract Price (Nov.1) 1180 pts 14190 yen
Multiplier 10000 1000
Contract size (JPY) \11,800,000 \14,190,000
Mini Contract Price (Nov.1) 1180 pts
Multiplier 1000
# Contracts 2
\14,160,000
\2,360,000
\11,800,000
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11.85
11.90
11.95
12.00
12.05
12.10
12.15
12.20
12.25
11/1
/201
3
11/2
/201
3
11/3
/201
3
11/4
/201
3
11/5
/201
3
11/6
/201
3
11/7
/201
3
11/8
/201
3
11/9
/201
3
11/1
0/20
13
11/1
1/20
13
11/1
2/20
13
11/1
3/20
13
11/1
4/20
13
11/1
5/20
13
11/1
6/20
13
11/1
7/20
13
11/1
8/20
13
11/1
9/20
13
11/2
0/20
13
N/T Ratio
13400
13600
13800
14000
14200
14400
14600
14800
15000
15200
15400
1140
1160
1180
1200
1220
1240
1260
TOPIX (Left Axis) Nikkei (Right Axis)
Trading the indices
Buy:1 Large N225 Sell:1 Large TPX 2 Mini TPX
Position November 1, 2013 November 20, 2013 Profit
Nikkei 225 Large (Long) \14,190,000 \15,100,000 + \910,000
TOPIX Large (Short) \11,800,000 \12,355,000 - \555,000
TOPIX Mini (Short) \2,360,000 \2,471,000 - \111,000
Total + \244,000
Sell:1 Large N225Buy:1 Large TPX 2 Mini TPX
How does it work out?
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*Figures are for week of 10/28 to 11/1.**Margin calculated using SPAN. Actual margin required by broker may vary.
Trading the indices
BEFORE
1 TOPIX Large: \360,0002 TOPIX Mini: \72,000
1 Nikkei 225 Large: \480,000
AFTER
1 TOPIX Large (short): \360,0002 TOPIX Mini (short): \72,0001 Nikkei 225 (long): \480,000Margin discount: (- \705,980)
Margin savings of about \705,980 (77%) thanks to merger
Your potential returns increase by 92%
Total required margin: \912,000 Total required margin: \206,020
What about margins?
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Characteristics of N/T ratio trade
Opportunities in all market environments
Advantages:
Risks:
Futures are leveraged products with inherently high risk
Take sector positions through products with deep liquidity, less idiosyncratic risk
Low required capital investment
Index constituents may change suddenly/significantly
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How do I get started?
Contact a JPX trading participant:
A list is available on our website:
http://www.tse.or.jp/english/about/participants/index.html
Any other questions?
Contact us!
http://www.tse.or.jp/english/about/participants/index.html�mailto:[email protected]�mailto:[email protected]�mailto:[email protected]�
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Disclaimer : The descriptions in this publication are intended solely for the purpose of providing information on futures andoptions. Losses may be incurred due to fluctuation of prices of futures and/or options, etc. and the entire deposited margin or a portion of such may be lost. Losses may also exceed the deposited margin. Investors must carefully review the documents provided by their financial services provider before trading futures and/or options, and must trade on their own responsibility based on their own judgment only after fully understanding the product qualities, the trading mechanism, relevant fees, the risk involved, etc. While every effort is taken to ensure the accuracy of the information contained in this publication, Japan Exchange Group, Inc. and its subsidiaries shall not guarantee and be liable for any damages caused by any errors or omissions in this publication. Japan Exchange Group, Inc. and its subsidiaries reserve the right to change the contents of this publication without prior notice.Copyright Ⓒ Japan Exchange Group, Inc. 2013 All rights reserved.
Trading Index Futures on the JPX Market�- An Introduction to TOPIX and the N/T Ratio Trade - What is TOPIX?How is it different from the Nikkei? How do the methodology differences affect price movements? Playing the difference between TOPIX and N225 : the N/T Ratio TradeHow do I trade it? Trading the indicesTrading the indicesTrading the indicesTrading the indicesCharacteristics of N/T ratio tradeHow do I get started? Slide Number 13