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CME Group is the world’s leading and most diverse derivatives marketplace. The Bund future: ideal for the novice trader? One of the main criteria which makes a financial instrument interesting for active daytraders is its volatility. Volatility is essential to profitable trading.
But other criteria are also important. The novice trader should nevertheless ask himself the question if these traditional popular trading markets are also those in which he should operate. Novice traders tend too easily to replicate what other, more experienced, traders do. Costs are an important component in trading. Novice traders will focus on commissions and other costs charged by their broker.
The brokerage market is very competitive. In many cases higher commissions can be justified by better and faster technology, order execution and quotes. A trader should not per definition opt for the cheapest broker, assuming they are all the same. A trader who looks beyond broker commissions will notice the existance of other costs which play a role. When comparing exchange fees the trader will notice that the most popular trading instruments are not necessarily the cheapest to trade. The trader will also notice that European exchange fees are much lower than U. USD exchange rate, 690 EUR less.
The Mini Dow has the highest exchange fee. The exchange fees drop dramatically in the case of European futures. Mini-DAX future attractive for retail investors. But the lowest exchange fee is applied to both the German government bond futures, Bund and Bobl. The novice trader should also familiarize himself with the margin requirements, not only because he probably trades a smaller account being a beginner but also because it is a factor related to position management. The required margin is a function of the size of the contract and the risk.
The Bund future has one of the lowest margin requirements. For the same margin requirement a trader can either buy 1 DAX future or 9 Bund futures. Although trading 9 contracts is more expensive than trading 1 contract, it does offer the trader more opportunities for building and reducing positions at an identical margin requirement. The nominal value of the contract is 100000 EUR. At the current market price of 160,00 a position of 1 future has a value of 160000 EUR. USD should take a look at the charts.
100-point movements are not rare, although this may partially related to the fact that the Bund future is at the time of writing near its all time high. Nevertheless, there is sufficient volatility for a well-organized trader to regularly unlock some trading profits. In the next articles in this series on the Bund future we will explore some Bund trading set-ups. Charting, strategies, automated trading, backtesting, playback watch these videos and become a platform master. CME Bitcoin futures are now available for trading.