Dow Jones Futures

Market

The value of the Dow futures is often quoted before the stock market opens as an indicator of how the market will react during the trading day. The underlying value of Dow futures is based on the Dow Jones Industrial Average, an index of 30 major U.S. companies. Trading Dow futures is one way traders attempt to profit from the value changes of the DJIA. Investors who do not participate in the futures markets can use the Dow futures as a forecasting tool.

History

The Dow Jones futures contract began trading at the Chicago Board of Trade (CBOT) – now the Chicago Mercantile Exchange (CME) in 1997 after much competition between the exchanges for the rights to trade futures and options products owned by Dow Jones & Company. Dow was reluctant to allow its name to be involved in futures trading for 15 years after the first stock index futures contracts began trading. Apart from major systemic factors that impact the economy as a whole, there are very many individual factors that drive the price of Dow Jones futures. For example, when the financial near-meltdown happened in 2008, the Dow was hit heavily by losses in three components in the financial industry: Bank of America, Citigroup and JPMorgan Chase. Citigroup is no longer in the index and was replaced in 2009 by an insurance company.

Facts

Major events and breaking news can occur during the one-hour window before the stock market opens, and the news usually gets priced into the futures contracts, fluctuating like a normal index. This allows investors to use the futures prices to get a generalized view of market sentiment and may help to position certain trading strategies before equity markets open.

Trading

  • The multiplier for the DJIA is 10. If a Dow Jones index future is trading at 10,000, one DJIA futures contract is worth $100,000. The DJIA e-mini futures contract trades at half the value.
  • Every one-point change in the Dow will cause a $10 change in real terms for the investor. If the Dow falls 100 points, the holder of the contract on the long side will lose $1,000.
  • DJIA futures contracts and e-mini contracts are traded at the CME.
  • DJIA futures contracts react to global events and economic reports, as well as statements and interest rate hikes from the U.S. Federal Open Market Committee and global world banks.
  • Delivery dates for DJIA futures contracts are four months in the March Quarterly Cycle (March, June, September and December).

 

Contract Specifications  

Contract SymbolContract UnitPrice Quotation
GYM$5 per contractdollars per contract
Trading ExchangeTrading HoursTick Value
CME GLOBEX17:00 - 16:151 index point = $5

Contract specifications are for the mini Dow.

 

Fundamental Reports

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This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.