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1. What is Futures?
Futures is an agreement between buyer and sell to buy/sell the underlying assets at the specific price in the predetermined time in the future

2. What is SET 50 Index Futures?
SET50 Index Futures is agreement between buyer and seller to buy/sell SET50 Index at the specific price in the predetermined time in the future. SET50 Index Futures is undeliverable contracts. Upon expiration, settlement method is cash settlement.

3. What is TFEX?
The Thailand Futures Exchange Plc (TFEX), a subsidiary of The Stock Exchange of Thailand (SET), was established on May 17, 2004 as a derivatives exchange. The TFEX is governed by the Derivatives Act B.E. 2546 (2003) and is under the supervision of the Securities and Exchange Commission (SEC).

4. What are products from TFEX?
Types of underlying assets that allowed to be traded are Futures, Options, and Options on Futures of the following underlying assets :

• Equity: Equity Index
• Debt: Treasury bills, Interest Rate
• Price Index: Gold, Crude Oil, Foreign Exchange

Thailand Futures Exchange will launch SET50 Index Futures as a first futures product. Bond futures and Interest Rate Futures will be next.

5. Who are TFEX investors?
Investors can be categorized into Hedgers, Speculators, and Arbitrageurs

• Hedgers attempt to protect themselves against the risk of an unfavorable price change in the market. Fund managers with a 100 Million stocks portfolio trading approximately in line with SET50 believed that the market would decline around 10%. By holding a Short position in Futures market, gain or loss on the stocks portfolio will reduce by loss or gain on the short hedge in futures position, respectively. This can reduce a huge unexpected result from price fluctuations.

• Speculators make profit from price fluctuations by taking risk from unfavorable price movement. For example, investors believed that SET50 Index Futures is trading below the actual price and expected that in 3 - 6 month's time the price will be going higher. Investors can initiate a Long position. Three months later, the market moves in favor, investors liquidate the position and make profit. However, loss might incur if the market moves against.

• Arbitrageurs are persons who engage in the practice of taking advantage of a state of inefficient market. For instance, SET50 Index is trading below SET50 Index Futures, arbitrageurs will buy a portfolio of stocks trading in line with the index as well as sell SET50 Index Futures. Arbitrageurs will be able to make profit from both markets. This is not a usual situation since investors will make profit from this opportunity until the risk free opportunity is disappeared.

6. What are the differences between futures prices and spot prices?
Futures prices can be traded at premium or discount from spot prices, subject to cost of carry and expected return. Can be shown in two cases :

1. Futures price equals to Spot price plus cost of borrowing and minus dividends

F=S+SrT-Sdt

F = Futures price, S = Spot price, r = cost of borrowing (%), d = dividends (%), T =Time to maturity

2. Commodity futures price equals to Spot price plus cost of borrowing minus convenience yield

F=S+SrT+SwT-SyT

F = Commodity futures price, S = Spot price, r = cost of borrowing (%), d = dividends (%), w = cost of carry (%), y = convenience yield (%), T =Time to matuariy

7. What are the differences between "Margin" in Securities trading account and Futures trading account?
In Securities trading account, Margin account is the account that allows investors to borrow money for securities trading. In Futures trading account, Margin is the minimum amount required for initiating a futures contract, approximately accounted for 5 - 10% of the contract value

8. Is it necessary that investors own a portfolio of stocks in order to invest in Futures?
Not necessary, if you are speculators and willing to take futures trading risk, you can hold outright positions.