Opportunities in Futures Trading

Why Investors must also be Traders?

Chong Kim Seng CEO Bursa Malaysia Derivatives Berhad 24 September 2011 @ Bursa Malaysia

The time required to execute a trade has gone from minutes to milliseconds

Webs of linked hubs provide global access to markets

Nine telecommunications hubs in Europe and Asia New hub launched in Kuala Lumpur in May 2010

Which do you prefer?

A Invest $10,000 to profit $1,000?

Invest $1,000 to profit $1,000?

Cash-on-Cash Return:

+ 10% versus + 100%

Concept of LEVERAGE CONTROL & Trading on MARGIN

Five (5) Time Frames

Very Short Short Medium Long Very Long

Two (2) Trading Statements On Prices

Price is not something; Price is not anything; Price IS everything.

Prices dont move in a straight line.

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10/1/1987 10/22/1987 11/12/1987 12/3/1987 12/24/1987 1/14/1988 2/4/1988 2/25/1988 3/17/1988 4/7/1988 4/28/1988 5/19/1988 6/9/1988 6/30/1988 7/21/1988 8/11/1988 9/1/1988 9/22/1988 10/13/1988

DJIAChart

Dow Jones Industrial Average Prices Trading vs Investing Opportunities

Oct 16, 1987 = 2,246 Oct 19, 1987 = 1,738 (-508 points or -22%) Oct 19, 1988 = 2,137 (+399 points or +23%) In-between Movements = 6,586 points or 15X

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600 1/2/2007 3/2/2007 5/2/2007 7/2/2007 9/2/2007 11/2/2007 1/2/2008 3/2/2008 5/2/2008 7/2/2008 9/2/2008 11/2/2008 1/2/2009 3/2/2009 5/2/2009 7/2/2009 9/2/2009 11/2/2009 1/2/2010 3/2/2010 5/2/2010 7/2/2010 9/2/2010 11/2/2010 1/2/2011 3/2/2011 5/2/2011 7/2/2011

800

FKLI

FKLI Trading vs Investing Opportunities

High = 1,600 Low = 800

Range = 800 In-between Movements = 12,661 points or 16X

CBOT - Wheat Prices Trading vs Investing Opportunities

High = 1,300 Low = 400

Range = 900 In-between Movements = 15,891 points or 17X

CBOT - Corn Prices Trading vs Investing Opportunities

High = Low = 800 300

Range = 500 In-between Movements = 9,739 points or 19X

CBOT Soybean Prices Trading vs Investing Opportunities

High = Low = 1,650 650

Range = 1,000 In-between Movements = 18,261 points or 18X

CBOT Soybean Oil Prices Trading vs Investing Opportunities

High = Low = Range = 70 29 41

In-between Movements = 665 points or 16X

FCPO Crude Palm Oil Prices Trading vs Investing Opportunities

High = Low = Range = 4,300 1,500 2,800

In-between Movements = 43,948 points or 15X

Have a view..and Trade!

Momentum OR Contrarian Fundamental Analysis (Supply & Demand) Value Analysis (Intrinsic Value vs Price) Technical Analysis (Price Charts) Aberration Analysis (Price Dislocations)

Trading vs Investing..
Adjust mindsets & approaches Operate within shorter time frames Capitalize on in-between price movements Long /Short /LongShort /ShortLong vs Long Only... Be equally versatile with buy first/sell later & sell first/buy later Be More Technical /Less Fundamental Optimize leverage with risk management control

Four (4) Organizing Principles Exchange Traded Products @ BMD

Integrity Price Discovery Liquidity Transparency

What you should ask for in Trading?

Transparent Prices Transparent Information Flows Immediate Known Executed Prices Control over Buy/Sell Decision Making

Decision Principle.
Money ON the table / Money OFF the table Stand ON the road / Stand OFF the road Trade it down Go Short Trade it up Go Long

Decision Principle :

GET ON / GET OFF

Trading the World.

Global Outlook Accessing locally Trading globally Trading as a life skill

Futures Price vs Cash Price: Movement & Convergence

Futures Price
Convergence

Cash Price Time

Delivery

Two (2) Derivatives Products / Opportunities @ BMD

FKLI FTSE Bursa Kuala Lumpur Composite Index Futures Contract FCPO Crude Palm Oil Futures Contract

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0 01/03/07 03/03/07 05/03/07 07/03/07 09/03/07 11/03/07 01/03/08 03/03/08 05/03/08 07/03/08 09/03/08 11/03/08 01/03/09 Mean 03/03/09 05/03/09 07/03/09 Mean Mean Mean 13 09/03/09 11/03/09 01/03/10 03/03/10 05/03/10 07/03/10 09/03/10 11/03/10 01/03/11 03/03/11 05/03/11 07/03/11 Mean HighLowDiff

RM/MT

Mean=16.8 Mean=21.2

KLCI Futures 5-year High Low Range

KLCIFuturesSpotMonthDailyRange(20072011)

Mean=12.8 Mean=11.3 Mean=13.6

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0 01/03/07 03/03/07 05/03/07 07/03/07 09/03/07 11/03/07 01/03/08 03/03/08 05/03/08 07/03/08 09/03/08 11/03/08 01/03/09 03/03/09 05/03/09 07/03/09 Mean Mean Mean 13 09/03/09 11/03/09 01/03/10 03/03/10 05/03/10 07/03/10 09/03/10 11/03/10 01/03/11 03/03/11 05/03/11 07/03/11 Mean Mean FCPO3rdMonth

RM/MT

Mean=RM41 Mean=RM89 Mean=RM60 Mean=RM44 Mean=RM59

CPO Futures 5-year High Low Range

CPOFutures3rdMonthDailyRange(20072011)

Agriculture vs Energy Price

Correlation FCPOvsWTICrude

2001 Present 2006 Present 2010 Present 83.4% 72.6% 69.0%

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Agriculture vs Precious Metal Price

Correlation FCPOvsGold

2001 Present 2006 Present 2010 Present 84.4% 66.8% 57.6%

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Agriculture vs Base Metal Price

Correlation FCPOvsCopper

2001 Present 2006 Present 2010 Present 82.2% 64.1% 89.2%

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Asian Agriculture vs US Agriculture Price

Correlation FCPOvsSoybeanOil

2001 Present 2006 Present 2010 Present 96.5% 93.7% 90.9%

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Definition of LUCK.
LUCK Preparation meeting Opportunities.

Ducks will line up for those who are prepared Be prepared

Have two (2) accounts..

Investing Account Securities Trading Account Derivatives

Two Important Requirements for Futures Trading

Trade for Profits $$$

Exercise Good Risk Management

Open a futures trading account. Be prepared.

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