How should I interpret the multiplier of futures contracts?
E.g. The Russell 2000 futures contract price is 1,135 with a multiplier of 500
Is the multiplier the number of shares per futures contract?
How come sometimes it has $ sign? Thanks
from the cfai book -->
Yeah, I got that too but when you have to calculate the number of shares that the futures contract can be converted to, they use - No of future contracts x Multiplier = number of shares.
there is a minor point you are missing there…
It is Nf (# of futures) * q (multiplier) [which is an amount] / (1+div yield)^T (denominator is also an amount)
If you have X Shares each earning a div yield for T period of time … you would end up investing the same amount as Nf * q
be aware i just did a fitch live mock & the contract multiplier was not given.
not sure if we are supposed to know the common futures contract specs?
Ah, ok, but the number of shares is still Nf x q? assuming each share earns (1+div yield) annually? Thank you
nf * q is the amount … not the number of shares.
Bump!
I’ve been trying to figure this out and my brain is turning into a pretzel.
What is the futures multiplier? What does it represent?
In particular, I’m stuck in Reading 32 EOC #3b. What does the 21,411.16 number of shares really mean? Shares of what? The actual stock?
The multiplier represents a number multiply by the price so that you dont have to get a zillion contracts.
Take for instance, S&P-emini uses a multiplier of 50.
Right now the S&P is worth 2800 (ish). So for one contract, you’re getting $140,000 of value. That means every dollar the S&P500 moves, you make or lose $50, roughly.
Shares of the underlying.
Value / price = shares