STOCK INDEX

An index represents a "basket" or portfolio of stocks or commodities, grouped in a particular way. An index is usually computed by performing a weighted average of all the stocks that comprise the index.

Stock indices at Monex are Nikkei 225, Hangseng, KOSPI 200, Dow Jones, Mini S&P500 and Mini NASDAQ.

Benefits of Stock Index Trading

1. Less capital investment required as there is no need to purchase a mutual fund or a barrage of stocks. The index can be purchased easily at a low cost, akin to buying any other stock.
2. Less volatile than the stocks represented as they are average of many stocks, so there is no need to observe the news and financial happenings of all the stocks listed.
3. The ability to short sell.

Nikkei

Nikkei225 is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. It has been calculated daily by the Nihon Keizai Shimbun (Nikkei) newspaper since 1971. Stocks are weighted on the Nikkei 225 by giving an equal weighting based on a par value of 50 yen per share. Events such as stock splits, removals and additions of constituents impact upon the effective weighting of individual stocks and the divisor. The Nikkei 225 is designed to reflect the overall market, so there is no specific weighting of industries. Stocks are reviewed annually and announcements of review results are made in September. Changes, if required, are made at the beginning of October. Changes may also take place at any time if a stock is found to be ineligible for the Stock Average (e.g. delistings, etc.). All proposed changes will be announced in Nikkei's Japanese newspapers and will appear on NNI. As of October 2006, the Nikkei 225 consists of the Foods, Automotive, Textiles & Apparel and other manufacturing companies of Japan. All 225 companies included in Nikkei Index 225 are major determinants of the Japanese economy. Its price is highly determined by Japanese high-tech stocks, providing a high correlation to NASDAQ.

1. Symbol - NK
2. Name - Nikkei 225
3. Exchange - IOM
4. Trading Months - H,M,U,Z
5. Trading Unit - $5 x Nikkei Stock Index

How to trade indexes

Assume the Nikkei is currently at ¥16,000. Each contract consists of 500 Nikkei shares. Hence if you buy 1 lot of Nikkei with the hope that Nikkei will continue its upturn, you are actually buying worth:

16,000 x 500= ¥8,000,000

Assuming the USD/JPY is currently trading at 118.00, the contract you are buying is approximately worth $68,000.

Leverage is usually allowed for trading indexes. This allows you to make a large profit (or loss) with a smaller.

If you opt not to use any leverage, you will have to deposit the entire sum of $68,000 as that is the worth of the contract.

If you opt to use a leverage of 10, you will need to deposit only 1/10th of the contract, i.e. $6,800.

However, whatever leverage you use, keep in mind the fact that you are buying worth $68,000.

If the Nikkei goes to 16,200 as you had counted on, your profit would be the difference:

(16,200-16,000) x 500 =  ¥100,000~ $850

However, if the Nikkei makes an adverse price movement, and instead falls to 15,800 you sell Nikkei at the market, your loss would be the difference between the buy and sell price.

(15,800-16,000) x 500 =  -¥100,000~ -$850

Nikkei	P/L	Margin=100%		Margin=10%
		Required	ROI	Required	ROI
15,800	-850	$68,000	-1.25%	$6,800	-12.5%
16,000	0	$68,000	0%	$6,800	0%
16,200	+850	$68,000	+1.25%	$6,800	+12.5%

As seen in the tables above, using a larger leverage allows you to make large profits. However an adverse market move, can also amount to losses being as large. Hence always leverage with caution and choose a level of risk depending on your comfort.

Hang Seng

The HSI futures market is based upon the Hang Seng stock index, which is the primary stock index of HKEX (Hong Kong Exchanges and Clearing) in Hong Kong. The Hang Seng index is calculated using prices of the 38 capitalization weighted companies, and the HSI futures market is traded on the HKFE (Hong Kong Futures Exchange) from 9:45 AM to 12:30 AM, and from 2:30 PM to 4:15 PM Hong Kong Time. The HSI futures market has a daily trading volume of approximately 50000 contracts, and a daily price range of approximately 300 points (300 ticks). First launched in 1969, Hang Seng Index comprises of 33 blue chips of Hong Kong Stock Exchange. HSI 33 is heavily dominated by HSBC Holdings and China Mobile, with a high correlation to Dow Jones Industrial Average.

Companies

As of March 2007, the Hang Seng stock index includes the following 38 companies :

HSBC Holdings Hang Seng Bank Bank of East Asia HKEX China Construction Bank hallHa Henderson Land Development Company Sun Hung Kai Properties Sino Land Company Hang Lung Properties Wharf Pacific Century CyberWorks Hutchison Whampoa New World Development Company Swire Pacific

MTR Corporation Industrial and Commercial Bank of China BOC Hong Kong Bank of China CLP Holdings China Merchants Holdings CITIC Pacific China Resources Enterprise Cathay Pacific Airways Esprit Holdings Sinopec Li & Fung Yue Yuen Industrial China Unicom

CNOOC China Netcom Group China Mobile Hong Kong and China Gas Company Hong Kong Electric Holdings Cheung Kong Cheung Kong Infrastructure Holdings COSCO Pacific Foxconn International Holdings China Life Insurance Company Contract Specifications The full contract specifications for the HSI futures market are as follows :

Symbol (IB / Sierra Chart Format) : HSI

Exchange : HKFE

Currency : HKD

Multiplier / Contract value : 50 HKD

Tick size / Minimum price change : 1

Tick value / Minimum price value : 50 HKD

Kospi

Supported by its active and volatile cash market and favorable East Asian economy, KOSPI 200 has become one of the most active futures markets in the world. Other than Korean investors themselves, international investment banks, asset management funds, as well as hedged funds have tapped in to grab the emerging opportunity, contributing about 10% of the total transaction. Two hundred companies compiled in KOSPI 200 stock index futures represent around 70% of the total capitalization in Korea Stock Exchange. Unquestionably, this figure infers that KOSPI 200 is an indicator of Korean economic performance as a whole. Out of the two hundred elements, Samsung Electronics alone takes 20% of the total portion. Its performance, therefore, highly influences the movements of the index. Although KOSPI 200 in many cases shares many specifications with Nikkei 225 such as in term of contract size, trading months, and number of component companies, its characteristics are more similar to Hang Seng’s. The explanation lies beneath its method of calculation and the condition of having a few companies taking up much larger portions than the others. Like Hang Seng, KOSPI 200 adopts the market capitalization method. Yet, unlike Hang Seng and Nikkei, KOSPI is more correlated to Asian markets than to US markets.

As of October 2007, KOSPI has over 700 components. Top 10 stocks by market capitalization are:

1. Samsung Electronics (005930)
2. POSCO (005490)
3. Hyundai Heavy Industries (009540)
4. Kookmin Bank (060000)
5. Korea Electric Power (015760)
6. Shinhan Financial Group (055550)
7. SK Telecom (017670)
8. Woori Finance Holdings (053000)
9. LG.Philips LCD (034220)
10. Hyundai Motor (005380)

KOSPI 200 - Contract Specifications

1. Symbol - KS
2. Name - KOSPI 200
3. Exchange - KFE
4. Trading Months - H,M,U,Z
5. Trading Unit - KRW 500,000
6. Tick Size - 0.05 Points (KRK 25,000)

DJIA

DJIA stands for Dow Jones Industrial Average, also called Dow 30 or just Dow Jones or Dow is one of the stock market index created at the first 19th century by the founder of Dow Jones & Company, Charles Dow. Dow compiled indices as a performance parameter from all American stock industrial components.

During the development, Dow was made of an average of 30 largest and go-public companies. Launched in May 26 1896, DJIA represents an average of 12 stocks or shares of American industry that holds important roles for the market.

From the origins, only GE (General Electric) is still listed on today’s Dow Jones components. Meanwhile, the other 11 merged to other corporations or still operates but removed from the Dow Jones components or been closed down.

S&P500

The S&P 500 Stock Index has long been the benchmark by which professionals measure portfolio performance. The Standard & Poor's Corporation designed and maintains the S&P 500 to be an accurate proxy for a diversified equity portfolio. The Index is based on the stock prices of 500 large-capitalization companies. The S&P 500 is capitalization-weighted, representing the market value of all outstanding common shares of the firms listed (share price x shares outstanding). This means that a change in the price of any one stock influences the Index in proportion to the relative market value of that firm's outstanding shares. General Electric, Wal-Mart Stores, Coca Cola Co. and General Motors are just a few of the well-known names included in the S&P 500.

1. Prices quoted in terms of Standard and Poor's 500 Stock Index
2. 1 Point = .01 Index Points = $2.50 per Contract
3. Ticker Symbol: SP
4. Size: $250 times S&P 500 Stock Index
5. Fluctuations: 0.10 = $25.00
6. Trading Hours: Electronic: 3:30pm - 8:15am, Monday through Thursday
   5:30pm - 8:15am, Sundays and Holidays
   Trading Suspended between 4:30pm and 5:00pm nightly
7. Floor: 8:30am - 3:15pm, Monday through Friday
8. Months Traded: F (January), H (March), M (June), U (September), Z (December)

NASDAQ 100

The NASDAQ (acronym of National Association of Securities Dealers Automated Quotation System) is an American stock exchange. It is the largest electronic screen-based equity securities trading market in the United States. With approximately 3,200 companies, it lists more companies and on average trades more shares per day than any other U.S. market. 335 companies are non-U.S. companies from 35 countries representing all industry sectors. It was founded in 1971 by the National Association of Securities Dealers (NASD), who divested themselves of it in a series of sales in 2000 and 2001. It is owned and operated by the NASDAQ OMX Group, the stock of which was listed on its own stock exchange in 2002, and is monitored by the Securities and Exchange Commission (SEC). To qualify for listing on the exchange, a company must be registered with the SEC, have at least three market makers (financial firms that act as brokers or dealers for specific securities), and meet minimum requirements for assets, capital, public shares, and shareholders. The Nasdaq Index comprises 100 of the largest domestic, non-financial common stocks listed on The Nasdaq Stock Market.

Prices quoted in terms of Nasdaq Index.

1. 1 Point = 0.01 Index Points = $1.00 Per Contract.
2. Ticker Symbol: ND.
3. Size: $100 times the Nasdaq- Index.
4. Fluctuations: 0.25 = $25.00.
5. Trading Hours: Electronic: 3:45 pm - 8:15 am, Monday through Thursday. 5:30 pm - 8:15 am Sundays and Holidays. Trading Suspended between 4:30 pm and 5:00 pm nightly
6. Floor: 8:30 am - 3:15 pm, Monday through Friday.
7. Months Traded: F (January), H (March), M (June), U (September), Z (December).