Hubert Senters here.
Got a question from a viewer. And I wanted to answer because I think it would be good for everybody and this also come in play with the markets roll over.
If you just do long only you should always have a small futures account hegde your position. Now, heads up, I’m not a Financial Advisor or I don’t play one on the internet or on TV.
I used to be registered on the futures business as a series 3, series 3. I’m no longer registered. But I will walk you through how this stuff works. And heads up, I suck at math so I’ll make sure you double check me.
I hated these questions on the CFTC series 3 and series 3 exam. But this is how the stuff works so.
I’m a trial member. I purchased the Ichimoku course last night primarily because I have a Vanguard account. Vang is for investors not active traders.
I’m looking to hedge my positions there with the ES when the market falls hard as it did last spring.
My question is: if the S&P is it @3800 for example, how much cash $is 1 ES contract worth? 100K in my Vanguard account would one contract be enough to cover that? I know that’s a question my broker should answer.
I called TOS & the trade desk guy was dumber than I am. He said 1 ES contract is worth roughly 19K. I knew that couldn’t be right. Hell 1GC equals 100 oz of gold, corn equals $5,0000 bushels.
I watched futures 101 but it didn’t talk about the worth or formula for calculating the worth of an ES contract.
So this is the confusion part about futures. Every contract has its own cash equivalent notion value and a multiplier that it uses. That’s the only complicated thing about futures. I want you to get it down is not too hard.
I’m going to guess it’s worth $190k instead of $19K. Help please. Thank you. Steve.
Steve, great question. Here’s how it works. The notional value of one contract is 50 times the value of the S&P 500 stock index thus for example $3939.50 X 50 where it basically closed today then that one contract would be notional value worth a $196,000 so.
One contract should cover you should be fine. If it doesn’t you could always add more. Now, you can’t trade a half a contract so. i would start with one.
If that covers you then you’ll be fine and then you can kind of look at your overall portfolio. Let’s say you just all long equities. If you get one.
If you get short one S&P futures contract in E mini then if it’s going down about the same rates that your investments are going in.
In other words if your profit goes up in your S&P short futures contract as your equities are going down so in other words you’re losing money and stocks.
But as the market goes down you would be making money as your short position goes up. I think you’d be fine with one contract. Obviously, if you need more you can just add.
And I would just double check the answer I just gave you and just do your own math. You could also Google CME Notional contracts and values and that will give you usually a couple of things on Wikipedia and then CME group about contract notional values.
I hope that helps you out, Steve. You’re doing the right thing. And it’s always good to check anything that everybody tells you or your broker or me on the video.
But I do like the fact that you’re getting rate the hedge for the potential market when it rolls over because heads up folks they don’t all just go up that they’re doing right now.
And when they go down if you don’t hedge you’re going to take some pretty big losses so what Steve is doing is the right thing in my opinion.
I’m going to be doing a special live webinar tomorrow February 13th at 11AM EST on My Secret Weapon for Finding Better Trades.
The cool thing about this is this helps me find brand new fresh trades and new trends and it also lets me find smoking hot trends that are well established and then I can buy either pullbacks or breakouts on those. I’m going to show you how to do that tomorrow morning.
Good luck. Hope it helps. See you on the next video.
Hubert.
