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FAQ --- Futures (Hong Kong)
Q: What are financial futures?
A: Financial futures contract is a legal binding agreement between two parties to buy or to sell a specific financial instrument at a given future date with an agreed price set at the time of dealing. When investors enter into a contract, they only have to pay a small portion of the whole contract amount as a margin to participate in the movement of the whole contract. Investors as a result make a good return due to the leverage. However, the leverage can sometimes lead to substantial loss and the loss may exceed the original amount invested. Therefore, investors must fully understand the associated risks and judge whether the investment instruments suit them before trading futures contract.
Q: What are the differences between index futures and index options?
A: The holder of index options has the right (but not obligation) to buy or sell the index at a given future date with a set price, while the holder of index futures has obligation to buy or sell the index at a given future date with a set price.
Q: What is margin?
A: When trading futures contract, both buyers and sellers have to deposit an initial margin into the trading account. Such margin amount usually anticipates the daily price risk to cover the price fluctuations. HKEx will adjust the margin level in respect of market conditions. Revaluation of account balance according to the value of each contract, or ¡§Mark-to-market¡¨ will be taken place after market hours on every trading day. When the account balance falls below 80% of the initial margin deposit, i.e. below maintenance margin after marking-to-market calculation, a margin call will be issued. Clients have to deposit additional margin into the account to restore the margin level to initial margin level within a specific period. If clients fail to fulfill the margin obligation, clients¡¦ open position may be forced to close with losses. For margin requirement of futures contract, please check it out from the following website: http://www.hkex.com.hk/tradinfo/futuresmargin/margin_c.htm Besides index futures, index options also have margin facilities. Initial margin should be deposited for short selling an option.
Q: Before trading futures or options, do I need to deposit sufficient margin/ premium into my futures account?
A: Yes. For trading futures contract or a short position in options in PSHK, sufficient amount of margin must be deposited into clients¡¦ futures trading account before trading the aforesaid contracts accordingly. For a long position in options, sufficient premium must be by the same way deposited before trading. If you have fund in your Securities/ Leveraged Foreign Exchange Account with PSHK, you must notify us to transfer your fund internally from your Securities/ Leveraged Foreign Exchange Account to Futures account to fulfill margin requirement or premium requirement before trading.
Q: In what circumstances will PSHK call for additional margin?
A: When clients¡¦ margin subtract unrealized loss drop below the maintenance margin level (i.e. 80% of initial margin), clients with open position have to restore the margin level to initial margin level by depositing additional fund to PSHK, or else PSHK is entitled to liquidate clients¡¦ position.
Q: What is Open Interest (OI)?
A: Open Interest is the total number of futures or options that have been bought or sold but have not been offsetting by an opposite transaction or settled by delivery of the underlying. A buyer and a seller exist in each open transaction, but only one side of the contract will be counted while calculating the Open Interest.
Q: What HKEx futures products can I trade through PSHK?
A:

 

Futures

Options

Hang Send Index

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Mini Hang Seng Index

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H-shares Index

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Mini H-shares Index

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FTSE/ Xinhua China 25 Index

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Gold Futures

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Q: Can a standard futures contract be offset by mini future contracts? (i.e. Hang Seng Index Futures & Mini-Hang Seng Index Futures)
A: If the underlying and contract terms of the standard futures contract and the mini futures contract are same, except different from contract multiplier (Mini-Hang Seng Index Futures is 1/5 of Hang Seng Index Futures), they can be offset.
Q: If I buy/ sell several times of the same contracts and settle them accordingly, what is the sequential order of settlement?
A: If no special instruction has been given, clients¡¦ position will be offset based on First-In-First-Out principal, i.e. the earlier the open position is, the earlier it will be settled.

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Polaris Securities (Hong Kong) Limited ("PSHK") is a licensed corporation registered with the Securities and Futures Commission (CE NO. ABZ023) and a participant of The Stock Exchange of Hong Kong Limited and Hong Kong Futures Exchange Limited. (Exchange Participant No. 01599)
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