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E-mini Nikkei 225 (JPY) Futures (Dec 2024)E-mini Nikkei 225 (JPY) Futures (Dec 2024)E-mini Nikkei 225 (JPY) Futures (Dec 2024)

E-mini Nikkei 225 (JPY) Futures (Dec 2024)

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ENYZ2024 trade ideas

MNK1 Shakeout Complete at 42,650 =BUY the Smart Money Move**Market Structure Assessment:** 📈 • Points 1→3: Established higher high formation ✓ • Confirmation: Point 2 now validated as institutional support 🏛️ • Seller capitulation from Point 1 has been definitively absorbed 💪 **Price Action 3→4:** 📉 • Natural retracement to value area identified ✓ • Confluence of profit-taking and new short positions 🤝 • Orderly pullback to Point 2 support zone - textbook execution 📚 **The Spring Mechanism at Point 4:** 🎯 • Liquidity sweep below Point 2 - surgical precision ⚡ • Stop-loss cascade harvested by institutional algorithms 🖥️ • Immediate recovery = Wyckoff Spring confirmed ✅ **Probability Matrix:** 🎲 • Support integrity: MAINTAINED (wick only, no close below) ✔️ • Chaos Theory projection: 57% continuation probability 📊 • Risk/Reward ratio: ACCEPTABLE for final position 💰 **Technical Confluence:** 🔬 • Hidden bullish divergence triple confirmation (RSI/MFI/A-D) ✅ • High-volume absorption node at spring point 📊 • Wyckoff accumulation Phase C validated ⭐ **Risk Acknowledgment:** ⚠️ • Point of Control resistance overhead - monitored 👁️ • Position sizing: MAXIMUM ALLOWABLE 💯 • Stop-loss: ABSOLUTE at spring low 🛑 This is the trade. This is the moment. Fortune favors the prepared. 🎖️ **EXECUTING LONG POSITION. NO SECOND CHANCES.** 🚀 *Risk management is paramount. Trade responsibly.* 📋
CME:MNK1!Long
by jacesabr_real
NIKKEI FUTURES: Liquidity Hunt → Rally → Major Correction SetupSharing my current outlook on Nikkei futures with a simple but effective read. 📈 **🎯 My Expectation:** I'm anticipating a classic liquidity grab below recent lows, followed by another leg higher. After this move, we might see a more significant corrective pullback. 📉 **📍 Target Zone:** A move up to around 44,500 would provide an ideal setup. This level would create what looks like the second touch of a potential double top pattern - that's where I'm planning to take profits. 🎯 **🧠 Market Structure Logic:** This type of move is textbook market behavior: sweep the weak hands out with a liquidity grab below support, then drive price higher to collect stops above resistance. Simple, but effective. 🔄 **⚠️ What I'm Watching:** - Clean break below recent lows (liquidity hunt) - Quick reversal and momentum shift upward - Approach to the 44,500 area for potential double top formation **📊 Risk Consideration:** If we don't see the expected liquidity grab first, or if price breaks structure in an unexpected way, I'll reassess the setup. The beauty of having a plan is knowing when it's not working. 🛑 --- **Trading is simple.** You don't need multiple indicators or dozens of lines on your chart. A clean and simple chart often works best — it keeps your decisions consistent and reduces uncertainty. Sure, it might not look flashy, and my analysis may seem a bit "plain" compared to others… but that's how I like it. If you find this analysis useful, feel free to follow me for more updates. --- *Disclaimer: This post is for general informational and educational purposes only. It does not constitute financial advice, investment recommendation, or a service targeting specific investors, and should not be considered illegal or restricted information in any jurisdiction.*
OSE:NK225M1!Long
by Hiroyuki-Suzuki
Export Strength Fuels Japan’s Growth,But Tariff Risks Loom AheadJapan’s economy defied expectations in Q2 2025. Exports roared back as a key driver, powered by a new U.S. trade deal and a weaker yen, sending the Nikkei higher. However, with tariffs and a cooling investment outlook on the horizon, the question is whether this upside has staying power. Nikkei Rallies on Growth Surprise, Though BoJ Warns Boost May Fade On 15/Aug, preliminary data showed that Japan’s economy expanded by 0.3% in Q2 2025, outpacing forecasts of 0.1% and building on the upwardly revised growth from the previous quarter. Chart 1: Exports Drive Japan’s Q2 GDP Surprise, Economy Outpaces 0.1% Forecast Source: Trading Economics (as of 18 Aug 2025) The upside surprise was driven primarily by stronger exports, which contributed 0.3 percentage points to GDP after dragging growth by 0.8% in Q1. Japan’s GDP growth beat expectations, offering a welcome surprise after a difficult second quarter marked by trade uncertainty. A breakthrough came on July 23, when Japan finalized a trade agreement with Washington that imposed a uniform 15% tariff on exports, including autos. While the tariff reprieve on autos is significant, it is not the sole driver of recent momentum. The yen’s weakness has also supported Japanese exporters, as overseas earnings translate into higher profits when converted back into local currency. Chart 2: Nikkei Soars While Yen Stumbles Against the Dollar since 2024 The key question is whether the Nikkei’s latest rally has the strength to continue, or if near-term headwinds could slow it down. Exports to the US saw a temporary boost from front-loading ahead of higher U.S. tariffs, followed by a pullback. Chart 3: Tariff Fears Spark Export Rush Followed by Retreat Source: Ministry of Finance (as of 18 Aug 2025) Industrial output is set to dip near term from factory shutdowns and mounting pressure from weaker overseas demand. Chart 4: Factory Shutdowns and Sluggish Demand Cloud June Output Rise Source: Trading Economics (as of 18 Aug 2025) Household spending is set to remain strained, as higher food prices and weaker bonuses from lower corporate profits are likely to weigh on consumption through the second half of the fiscal year. Chart 5: Rising Food Costs and Weak Bonuses Squeeze Household Spending Source: Trading Economics (as of 18 Aug 2025) The BoJ has cautioned that the drag from tariffs is likely to weigh on corporate earnings. That backdrop argues for a more measured outlook. Adding to this, Marcel Theliant of Capital Economics noted that while GDP growth recently surprised on the upside, he sees momentum cooling ahead as investment eases and exports edge lower. Technical Indicators Chart 6: MACD Strengthens, But RSI Flashes Overbought Warning Prices remain firmly supported above short-term MA, with bullish momentum strengthening as shown by MACD. However, the relative strength index signals overbought conditions, suggesting that while the uptrend is intact, the market may be vulnerable to a near-term pullback. Chart 7: Bollinger Bands Hint at Rally Pause Despite Buyer Momentum Bollinger Bands suggest the same. While the uptrend is intact and buyers are clearly driving prices higher, the rally may be overextended, leaving the market vulnerable to a near-term pullback or sideways consolidation. Hypothetical Trade Setup Chart 8: Hypothetical short position in CME Micro Nikkei 225 (Yen) futures expiring in September Japan’s safe-haven status looks fragile, raising the risk of a pullback in the Nikkei 225. These factors support taking a short position in CME Micro Nikkei 225 (JPY) futures. In this scenario, the yen-denominated Micro Nikkei Futures contract may boost USD-denominated returns, given the anticipated strengthening of the yen. The investor should manage downside risk by placing a stop-loss. Based on Chart 8, one option is to set it just above 45,085, a potential resistance level, which would represent a maximum hypothetical loss of JPY 71,000 ((43,665 – 45,085) × 50 yen/contract). Investors with a lower risk tolerance may choose a closer stop-loss. Hypothetical Short Position: Entry: 43,665 Target: 41,540 Stop Loss: 45,085 Potential Gains: JPY 106,250 ((43,665-41,540) x 50 yen/contract) Potential Losses: JPY 71,000 ((43,665-45,085) x 50 yen/contract) Reward-to-Risk: 1.5x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme . DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME:MNI1!Short
by mintdotfinance
Bond Market Uncertainty Weighs on NikkeiBy Pranay Yadav, Portfolio Analyst, Mint Finance Rising bond yields and an unexpected economic slowdown in Japan pose new risks to the Nikkei 225, following its recovery from the tariff-driven decline. Warning lights are flashing. Downside risk potential is present. Nikkei 225 is trading near its one-year average where it has previously shown a tendency to revert. What could help an investor hedge the uncertainty in the Nikkei 225? IMPACT OF RISING JGB YIELDS ON NIKKEI 225 Japan’s bond market witnessed renewed turmoil this spring, with a feeble 20-year auction pushing long-term yields to record highs. The 30-year JGB yield has hit an all-time high. Chart 1: JGB yields soar, fueled by tightening expectations and inflation pressures. Source: TradingView as of 23 May 2025 Rising yields pose potential risks for the Nikkei 225. Higher yields pressure the earnings-yield gap, eroding equity risk premium. In layman terms, when bond yields go up, investors will opt for the safety of higher bond returns instead of paying for equity risk premium. Additionally, higher yields tighten financial conditions, raise borrowing costs and squeeze corporate profits, potentially weighing down on Nikkei 225. Chart 2: 52-week correlation between JGB yields & Nikkei 225 has turned negative Source: TradingView as of 30 May 2025 As bond prices tank to decade lows and the yield curve steepens significantly, markets are increasingly vulnerable to disruption from carry trade unwinding. Chart 3: BoJ policy shift shocked the market last August, driving sharp adverse moves. Source: TradingView as of 30 May 2025 Historically, volatility in the bond market has often spilled into equities. Past 30Y JGB spikes tended to be succeeded by sharp Nikkei 225 drops. Will history repeat itself? Chart 4: Historically, JGB volatility spikes have triggered equity volatility. Source: TradingView as of 30 May 2025 Monetary policy uncertainty & fragile global trade have pushed JGB into turmoil. The GDP contraction in Q1 is an additional factor which will potentially force a shift in BoJ’s policy path. Slowing growth weighs down on the equities through weaker domestic demand. BoJ’s situation could get complicated due to slowing GDP and rising inflation which may push Japan towards stagflation. Chart 5: Japan’s economy shrank in Q1 amid disruptive tariff impact. NIKKEI TRADING AT LONG-TERM MEAN The Nikkei 225 is trading at its long-term average and over the past year the index has shown strong mean reversion around this level, speaking volume about the need for understanding the market dynamics, economic conditions, and the specific characteristics of the Nikkei 225. Chart 6: Mean reversion in Nikkei 225 over the past year Source: TradingView as of 30 May 2025 While past trading levels suggest more upside for a short positioning, a sharp decline may occur if a major risk event unfolds. Chart 7: Nikkei 225 technical indicators signal contrasting views. Source: TradingView as of 29 May 2025 A bearish MA crossover is imminent which could suggest near term downside. Although, MACD signals that the recent bearish trend may be fading. CONCLUSION AND CASE STUDIES Risk signals are flashing with spiking JGB yields and slipping GDP. As Nikkei 225 trades near its long-term average, risks of mean reversion mount. Chart 8: Hypothetical short position in CME Micro Nikkei-225 (Yen) futures expiring in September Source: TradingView as of 6 June 2025 If an investor believes that these risks could materialize and that the Nikkei 225 could decline, they may consider shorting the CME Micro Nikkei 225 (Yen) futures. In this case, the yen-denominated Micro Nikkei Futures contract could further enhance the profit in USD due to the anticipated strengthening of the yen. The investor should manage downside risk by placing a stop-loss. Based on Chart 8, one option is to set it just above the Jan high of 40,330, a potential resistance level, which would represent a maximum hypothetical loss of JPY 130,000 ((37,730 – 40,330) × 50 yen/contract). Investors with a lower risk tolerance may choose a closer stop-loss. If the Nikkei 225 pulls back to around 32,250, a support level observed in mid-April, this hypothetical short position could yield JPY 274,000 ((37,730 – 32,250) × 50 yen/contract). However, market movements are unpredictable, and there is no guarantee that the index will reach this level before the futures contract expires. Hypothetical Short Position: Entry: 37,730 If Nikkei 225 Falls: 32,250 Stop Loss: 40,330 Potential Gains (JPY): JPY 274,000 ((37,730-32,250) x 50 yen/contract) Potential Losses (JPY): JPY 130,000 ((37,730-40,330) x 50 yen/contract) Conversely, investors who remain optimistic that risks highlighted above will not materialize in the near-term, may consider taking a long position in the Nikkei 225 as demonstrated in chart 9. Chart 9: Hypothetical long position in CME Micro Nikkei-225 (Yen) futures expiring in September Source: TradingView as of 06 June 2025 The investor could consider placing a stop-loss at the support level of 36,280, which was tested in March, based on Chart 9. This would represent a maximum hypothetical loss of JPY 72,500 ((36,280 – 37,730) × 50 yen/contract). Assuming Nikkei 225 rises to 40,330, the previous high set in February, the hypothetical long position could yield JPY 130,000 ((40,330 – 37,730) × 50 yen/contract). Hypothetical Long Position: Entry: 37,730 If Nikkei 225 Rises: 40,330 Stop Loss: 36,280 Potential Gains (JPY): JPY 130,000 ((40,330-37,730) x 50 yen/contract) Potential Losses (JPY): JPY 72,500 ((36,280-37,730) x 50 yen/contract) Directional views on the Nikkei 225 come with inevitable uncertainty. Investors can opt for spread positions to reduce it. A spread comprising a long position in the Nikkei 225 and a short position in the S&P 500 allows investors to maintain a bullish view on the Nikkei 225 while stay hedged against a potential drawdown through the short S&P 500 position. We covered the hypothetical spread trade in detail in a previous paper . In brief, this spread trade helps the traders seize opportunities in the relative outperformance of Japan equities due to capital flows to Japan while remain insulated in case of a drawdown. Foreign funds have been net buyers of Japanese stocks for seven weeks in a row as of May 2025. Chart 10: Net weekly foreign investment in Japan stocks continues to ramp up Chart 11: Hypothetical spread between CME Nikkei-225 (USD) and CME E-mini S&P 500 expiring in September Source: TradingView as of 6 June 2025 Investors can deploy CME Micro E-mini S&P 500 futures alongside CME Micro Nikkei 225 (USD) futures to express this view. Alternatively, the standard E-mini S&P 500 and Nikkei 225 (USD) contracts can also be deployed. A position consisting of 3 x MNKU2025 ($56,595 = 3 x 0.50 x 37,730) in notional) and 2 x MESU2025 ($60,250 = 2 x 5 x 6,025) in notional) roughly balances notional on both legs, allowing for a purely relative outperformance-based trade. In this hypothetical trade-setup, the Micro Nikkei 225 (USD) contract is used to maintain P&L on both legs in the same currency, simplifying spread execution. Looking at Chart 11, the Nikkei 225/S&P 500 ratio previously reached a high of 6.800 last July before retracing. If an investor exits at that level, the potential gain could range from $4,760 to $4,860, as outlined below. To manage risk, the investor could set a stop-loss at the bottom of the spread range which hit a low of 5.890 in early 2022. This would imply a potential loss between $3,364.5 and $3,810. www.phillipnova.com.sg For now, Sayonara! Micro Nikkei 225 (USD) and Micro E-mini S&P 500 spread tracks the performance of the standard contract spread.
CME:MNI1!Short
by phillip_nova
Japanese Yield Surged to Record High 3.2% - Nikkei OutlookAre Japanese markets still a buy after rising 170% since the pandemic, surpassing their roaring 1980s levels? The reason why Japanese stocks have become some of the best-performing equities in Asia is largely due to the falling yen — a depreciation of around 60%. A weaker yen boosts Japan’s major exporters (like Toyota, Sony, and Panasonic), as their overseas earnings convert into higher yen profits. But what’s the downside? - Inflation Yes, they wanted inflation, below 2% yoy will be ideal, but not at this rate of growth at 3.5%. Another key reason for the stock rally starting in 2020 was that, just like the U.S., the Bank of Japan (BOJ) unleashed massive monetary stimulus, flooding markets with liquidity during the pandemic. Although the yen has fallen sharply, it seems to have stalled since 2024, that was when the BOJ started raising interest rates from –0.1% to the current +0.5%. With inflation continuing to rise, the BOJ will likely maintain a hawkish stance on interest rates. This could cause the yen to strengthen or push USD/JPY lower. I am also observing a potential head and shoulders formation on the USD/JPY. And if the yen strengthens, this may cause the Japanese stocks to meet its road block. Nikkei 225 performance since the post WWII to its roaring 80s, to its collapsed, and now rebounded. Even though prices have breached the 80s level in 2023, it could represent a false breakout, as prices continue to fall back below that historic resistance the last 2 years. My assessment: The Japanese stocks are still testing their 80s high — a major psychological level. With money printing, the yen weakened; and a weaker currency fueled inflation. With inflation, yields and interest rates rise, borrowing costs are increasing across the different tenures — and that’s not good news for stocks. The 30-year yield is now at around 3% — a level surpassing the deflationary years and that’s something most Japanese would not have imagined just a few years ago. With a raising interest rate and a stronger yen, let’s see how this will impact the Nikkei 225. Since the BOJ began raising interest rates at the beginning of 2024, the market has literally stalled within a wide 10,000-point range. And there is a key support level at 30,000, we can see it was a resistance in the past. Currently, the BOJ is trying their best in managing the yen and inflation very carefully, to maintain financial system stability. Based on this sentiment, I believe the market will likely continue moving within this wide range — though it may gradually narrow over time. Make sure to keep monitoring the direction of the Japanese yen, yields, and inflation. If the yen strengthens too quickly, or if yields and inflation rise too sharply, it could push the market to break below this range and start trending downward. And if it is all well, market will likely to continue its upward momentum. Another key factor I am watching closely is tariffs. The direction of the Japanese stock markets will also be influence by the tariff agreements ultimately with US, and as well as how quickly they can forge potential trading partnerships and alliances — just like other nations, they are racing against time. Micro Nikkei Futures Ticker: MNI Minimum fluctuation: 5.00 index points = ¥250 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Trading the Micro: www.cmegroup.com www.cmegroup.com
CME:NKD1!
by konhow
Japanese Markets: Still a Buy?Are Japanese markets still a buy after rising 170% since the pandemic, surpassing their roaring 1980s levels? The reason why Japanese stocks have become some of the best-performing equities in Asia is largely due to the falling yen — a depreciation of around 60%. A weaker yen boosts Japan’s major exporters, as their overseas earnings convert into higher yen profits. But what’s the downside? Inflation. (expand) Yes, they wanted inflation, below 2% yoy will be ideal, but not at this rate of growth at 3.5%. Micro Nikkei Futures Ticker: MNI Minimum fluctuation: 5.00 index points = ¥250 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Trading the Micro: www.cmegroup.com www.cmegroup.com
CME:NKD1!Short
by konhow
Nikkei 225 Wave Analysis – 21 May 2025 - Nikkei 225 reversed from the resistance level 38280.00 - Likely to fall to support level 36000.00 Nikkei 225 index recently reversed down from the pivotal resistance level 38280.00 (former top of wave 4 from the start of this year). The downward reversal from the resistance level 66.00 created the daily Japanese candlesticks reversal pattern, Shooting Star. Given the strength of the resistance level 38280.00, Nikkei 225 index can be expected to fall to the next support level 36000.00.
OSE:NK2251!Short
by FxProGlobal
Capital Rotation: A Value Play Amidst Tariff HeadwindsNikkei 225 – Capital Rotation: A Value Play Amidst Tariff Headwinds By Pranay Yadav, Portfolio Analyst, Mint Finance The US Liberation Day announcement on April 2 sent Nikkei 225 plunging. Subsequent tariff pause led to a strong rebound. Since then, Nikkei has recouped the losses. Significant risks remain, making renewed weakness possible if tariffs are reinstated after the pause. Major Japanese stocks are heavily reliant on exports to the US. Any disruption significantly hurts their revenues. While examining the tariff impact through the shift in Bank of Japan (BOJ)’s monetary policy, the paper also unpacks recent trend of capital rotation into Japan market. Chart 1: Nikkei 225 price action on tariff and its pause Tariffs & Shifting BOJ Outlook Trade tensions have cast a long shadow over Japan’s economic outlook. At its May 1 meeting, the BOJ held its short-term interest rate at 0.5%, while sharply cutting upcoming growth forecasts. Market expectations of BoJ rate trajectory have shifted. In a recent Reuters poll, expectation of a rate hike in Q3 2025 declined from nearly two-thirds to just over 50%. Meanwhile, 84% of respondents do not anticipate any rate hikes at BoJ’s June meeting. Chart 2: The outlook of BoJ rate hikes has been pushed further out, but the terminal rate by the end of 2025 remains unchanged. The BOJ halved the projected GDP growth for fiscal 2025/26 (to 0.5%) and pushed back the timeline for hitting its 2% inflation target by a full year to 2026. Governor Kazuo Ueda warned that “recent developments surrounding tariffs will weigh on Japan’s economy by slowing global growth, hurting corporate profits, and prodding households and companies to hold off on spending”. Policymakers struck a cautious tone, noting “extremely” high uncertainty around the outlook and indicating they will gauge data carefully before adjusting rates. Downside Risks from Export Weakness Nikkei has heavy weighting toward major exporters. U.S. tariffs pose a significant risk to their revenues. Beyond the direct revenue impact, exporters feel the heat of a strong yen. A weaker yen boosts profits when foreign earnings are converted, but as the yen strengthens, the profits tend to shrink due to currency effects. According to Toyota, one yen change in the USD/JPY currency pair impacts its operating profit by 50 billion yen. Chart 3: Yen has appreciated 8.8% against the dollar YTD but remains 25% weaker from its 2022 level. Chart 4: Historically, the Nikkei 225 has shown weaker performance when export volume losses coincided with yen-driven margin compression. In particular, the tariffs risk impacting the Nikkei 225’s heavy technology exposure. Chart 5: The Nikkei 225 is dominated (47% weightage) by the tech sector In an earnings update, Tokyo Electron Management (which has a 5.6% weight) indicated a flat business environment for the year, citing a “lull in both automotive and power semiconductor investment, and investment by emerging Chinese manufacturers.” Strong growth is only expected in 2026. The retail industry – a major index component (14%) – is dominated by Fast Retailing, which holds the single largest individual weight in the index at 11%. Fast Retailing the holding company of Uniqlo chains, has already trimmed second-half profit guidance by roughly 2%-3% after accounting for potential duties, despite sourcing most U.S. inventory from lower-tariff Southeast-Asian plants. Capital Rotation to Japan Through the lens of P/E Convergence Despite these challenges, global investors are increasingly rotating capital into international equities amid intensifying trade tensions. EU defence stocks have surged. Chinese equities have risen. Japanese stocks stand to benefit too. Foreign funds were net buyers of Japanese stocks for three weeks in a row in April. Chart 6: Net weekly foreign investment in Japan stocks has started to ramp up Japan offers a compelling relative value story. The Nikkei 225 trades at a P/E ratio of 18.3, roughly 34% cheaper than the S&P 500 (27.9 P/E). This valuation gap stands at near multi-decade highs, suggesting room for P/E multiple convergence as Japan’s capital market attracts more inflows. Chart 7: Nikkei 225’s P/E Ratio is substantially lower than S&P 500, suggesting the potential for P/E convergence Conclusion The tariff impact on Japanese equities is multi-faceted. Delay in BoJ rate hikes offers near-term support for the equity market, potential long-term effects on growth & inflation could offset these gains. Moreover, given Japan’s export-dependent economy, tariffs pose a significant revenue risk—particularly for firms with a high index weighting in the Nikkei 225. Many of these companies are already issuing more conservative outlooks for the year ahead. Chart 8: Technical signals point to a bullish sentiment on Nikkei 225 although resistance is on the horizon Investors expecting a favourable trade deal may opt for a long position on the Nikkei 225. A hypothetical trade setup is outlined below. In this case, the yen-denominated Micro Nikkei Futures contract could further enhance the profit in USD due to the anticipated strengthening of the yen. Chart 9: Hypothetical long position on CME Micro Nikkei 225 (Yen) futures expiring in June Entry: 36,700 If Nikkei 225 rises: 38,500 Stop Loss: 35,200 Potential Gains (JPY): JPY 90,000 ((38,500 – 36,700) x 50 yen/contract) Potential Losses (JPY): JPY 75,000 ((35,200 – 36,700) x 50 yen/contract) Reward-to-Risk: 1.2x Conversely, investors anticipating the continuation of tariffs may consider taking a short position on the Nikkei 225. Chart 10: Hypothetical short position on CME Micro Nikkei 225 (Yen) futures expiring in June Entry: 36,700 If Nikkei 225 falls: 34,500 Stop Loss: 38,200 Potential Gains (JPY): JPY 110,000 ((36,700 – 34,500) x 50 yen/contract) Potential Losses (JPY): JPY 75,000 ((36,700 – 38,200) x 50 yen/contract) Reward-to-Risk: 1.47x For investors seeking to avoid directional exposure amid trade uncertainty, a spread trade may be suitable – going long CME Micro Nikkei 225 futures (USD-denominated) and short CME Micro E-mini S&P 500 futures. Why choose a spread trade? It helps reduce outright risk amid near-term uncertainty. With trade disruptions still unresolved, the outlook remains unclear. A spread trade taps into the relative outperformance through P/E convergence, limiting downside while capturing divergences in equity performance. Spread trades help hedge global market shocks—such as the one in early April—while still offering meaningful upside potential. Chart 11: Nikkei 225/S&P 500 spread protects against a sharp decline during risk events Largest Decline (Past Year): Nikkei 225 (Yen) Futures -6.0% E-Mini S&P 500 Futures -6.1% Spread -4.5% Largest Increase (Past Year): Nikkei 225 (Yen) Futures 7.8% E-Mini S&P 500 Futures 9.0% Spread 3.0% A position consisting of 3 x MNKM2025 ($55,170 in notional) and 2 x MESM2025 ($56,650 in notional) roughly balances notional on both legs, allowing for a purely relative outperformance-based trade. In this trade setup, the Micro Nikkei 225 (USD) contract is used to keep the P&L on both legs in the same currency for simpler spread execution. Chart 12: Hypothetical spread position between CME Micro Nikkei 225 (USD) and CME Micro E-mini S&P 500 expiring in June Scenario 1: Sell 2 MESM2025 , Buy 3 MNKM2025, MESM2025: 5,665 -> 5,409 MNKM2025: 36,780 (Unchanged) Ratio: 6.8 Hypothetical Profit/Loss: USD 2,560 (5665-5409) x 5 x 2 Scenario 2: Sell 2 MESM2025 , Buy 3 MNKM2025, MESM2025: 5,665 (Unchanged) MNKM2025: 36,780 -> 38,522 Ratio: 6.8 Hypothetical Profit/Loss: USD 2,613 (38522-36780) x 0.5 x 3 Scenario 3: Sell 2 MESM2025 , Buy 3 MNKM2025, MESM2025: 5,665 -> 5,885 MNKM2025: 36,780 (Unchanged) Ratio: 6.25 Hypothetical Profit/Loss: USD -2,200 (5665-5885) x 5 x 2 Scenario 4: Sell 2 MESM2025 , Buy 3 MNKM2025, MESM2025: 55,665 (Unchanged) MNKM2025: 36,780 -> 35,406 Ratio: 6.25 Hypothetical Profit/Loss: USD -2,061 (35406-36780) x 0.5 x 3 Trade Nikkei 225 Futures from 10 Cents/Lot* Trade Nikkei 225 Futures from just 10 cents/lot. Learn more here and access this low-cost opportunity to start trading CME Micro Nikkei 225 with ease. The author’s views are independent and do not represent that of Phillip Nova. For applicable terms and conditions and a full risk disclaimer, please refer to www.phillipnova.com.sg. This advertisement has not been reviewed by the Monetary Authority of Singapore.
CME:MNI1!
by phillip_nova
Nikkei Futures (NKD/Nikkei 225) Inverse Cup and HandleNikkei futures have setup an inverse cup and handle on the daily. A somewhat rare pattern as most of them turn into double bottoms or sideways consolidation. Maximum downside target for the pattern is 21,000 - Global macro trends continue to worsen - BOJ stuck between saving the Yen and helping the dollar - Japan economic fundamentals may allow BOJ to allow inflation to run hot - Possible US recession could spread around the world - Yen carry trade still in play although most likely only blows up in catastrophic situation - Japan has seen the benefit of US monetary and fiscal policy, Trump admin likely to try to pressure Japan into spending money on US goods such as food and weapons Overall sentiment on NKD is that it has followed US markets especially the Nasdaq for some time. DXY moving up takes pressure off the Yen carry but could be a sign of now US firms taking profit on a very large run up in the past few weeks. Regardless of outcome, volatility is expected.
CME:NKD1!
by CrashoutCapital
Nikkei 225 Bounce Zone Holds AgainTraders should pay close attention to Nikkei 225 futures if the price returns towards 30,400. We’ve now seen decent bounces from around that level five times, including earlier today upon the resumption of trade after the weekend. While momentum signals are firmly bearish, with RSI (14) and MACD both trending lower, the former now sits at its most oversold level since the pandemic plunge in early 2020. That means the market may be vulnerable to even a minor shift in the prevailing bearish sentiment. For now, the preference remains to sell rallies over buying dips. A clean break of 30,400 would open the door for a run towards 28,400 or 25,600 — the latter a key technical level given how often it thwarted bearish moves in 2022. On the topside, resistance may be encountered around 33,300, marking where the price rout stalled last Friday. A break of that would put 35,120 on the radar. Good luck! DS
SGX:NK1!
by FOREXcom
The Nikkei (NKD) poised to continue its broader corrective trendThe Nikkei (NKD) has been trending lower since its peak on July 8, 2024. We indicate this decline follows a “double three” Elliott Wave pattern, characterized by a series of distinct movements. After reaching that high, the index fell to 30,720, rebounded to 40,675, and is now progressing downward in a zigzag formation as the internal within “wave y.” The index dropped to 36,275, rose to 38,029 with intermediate fluctuations, and has since resumed its downward trajectory. This ongoing move lower has already reached 33,525, followed by a recovery to 34,975. We anticipate the index will extend further downward to complete this phase. Afterwards, a temporary rally is expected to provide a correction before the next decline resumes. We anticipate the index will extend further downward to complete this phase. Afterwards, a temporary rally is expected to provide a correction before the next decline resumes. In the near term, as long as the high of 38,029 remains intact, any upward movements are likely to be limited, setting the stage for additional downside. Investors should monitor these developments closely as the Nikkei continues to navigate this pattern
CME:NKD1!
by Elliottwave-Forecast
Bullish Nikkei Faces Formidable HeadwindsJapan’s lost decades are behind us. Many long-term factors are driving resurgence in Japanese equities. Economic growth is accelerating – driven by strong domestic consumption. Radical market reforms have made Japan attractive for domestic and global investors. As a result, the benchmark Nikkei 225 set a new all-time-high after four decades. However, the rally is facing challenges. Tightening monetary policy, trade uncertainties, and waning impact of corporate efficiency reforms pose near-term headwinds that could push the benchmark into a correction, followed by a period of consolidation. BOJ’s rates hikes The Bank of Japan (BoJ) plays a crucial role in the performance of Japanese equities. Since 2016, the BoJ instituted negative rates to support economic growth which boosted equity markets. Chart 1: From 2015 to 2025, loose monetary policy boosted the Nikkei 225, but equities have stagnated since rates began rising However, in March 2024, the BoJ hiked rates for the first time after two decades. Subsequently, rates were lifted twice, up to 0.5%, the highest since 2008. Crucially, it intends to raise rates further as part of a broader return to neutral policy rate – one that’s neither too restrictive nor too accommodative. Chart 2: The Nikkei 225 tends to rise slightly before BoJ meetings but falls sharply afterward, especially following rate hike (2024 to Present) The BoJ is expected to hike rates by 50 basis points by end of March 2026 according to a Reuters poll . Two-thirds expect the next rate hike in Q3, likely in July this year. Traditionally the wage hikes in spring serve as a critical indicator for the BOJ, influencing its decision to continue raising interest rates as part of its shift towards a more neutral monetary policy. This year, many economists expect the wage hikes to match or exceed 5.1% as seen in 2024. With yen’s slide halting, the BoJ will have more room to manoeuvre. Consequently, a rate hike seems likely forming additional headwinds to Japanese equities. Fading impact of Corporate Reforms Nikkei’s ascent is also thanks in part to TSE’s corporate reforms. For years, Japanese equities were seen as “value trap,” dissuading investors. In 2023, to unlock the value trap, the TSE embarked on a campaign to enhance capital efficiency among listed Japanese firms to attract wider investment. New listing rules “urge” firms to deploy their capital better – either through shareholder returns or CAPEX. These reforms were effective in the near-term, boosting key valuation metrics such as P/B and P/E ratios. However, the improvements from these reforms are starting to slow. Chart 3: Japan’s Prime Market weighted average Price-to-Book ratio has fallen back to pre-reform levels over the past year (2023 to Present) Average P/B and P/E ratios of the prime market firms listed on the TSE is back to pre-reform levels. The large short-term bump from these policies have faded, no longer providing an immediate tailwind. Chart 4: Japan’s Prime Market weighted average Price-to-Earnings ratio has fallen back to pre-reform levels over the past year (2023 to Present) Tariff Risks Haunt Markets Perhaps the largest near-term risk facing the Nikkei 225 is the potential for trade disruptions. Chart 5: Nikkei 225 daily returns show a sharp drop on the day tariffs were announced Trump has announced a steep 25% tariff on imported cars, set to take effect on April 2, a dramatic 10-fold increase from the current 2.5%. Additionally, he has raised the steel and aluminium tariffs to 25%, with no exemptions or exceptions—a significant blow to Japan, one of America's key trade and security allies. Despite Japan’s trade minister Yoji Muto lobbying for relief in Washington, the U.S. has yet to offer any concessions. US remains Japan’s largest export market, accounting for ¥21 trillion ($140. 6 billion) in trade, with automobiles making up nearly 28% of that figure. The impending tariff spike is expected to dent Japanese exports, slash domestic production, and squeeze profit margins. Trade tariffs, especially those impacting some of the largest companies in the Nikkei 225 present a significant risk for investors. Additionally, the tariffs are likely to lead to a shrinking trade surplus for Japan which may weaken the yen and further exacerbate inflationary pressures, prompting the BoJ to hike rates. Nikkei 225 is Weighted Towards Exporters The Nikkei 225 index is dominated by technology firms which makes up almost half of the index. This sector includes both Electronic Manufacturing firms and Software & Communications companies. Notable firms within this sector are Tokyo Electron (5.9%), Advantest (5.7%), Softbank Group (4.2%), and KDDI (2.5%). Chart 6: Nikkei 225 sector weightings shows large weightage towards technology firms Other notable categories are Consumer Goods and Materials. Consumer Goods is dominated by Fast Retailing, the single largest component of the index with a weight of 10.7%. The index is impacted substantially by trade given its heavy tilt towards manufacturing. Rising input costs from imports and reduced demand for exports can both stifle performance Chart 7: Nikkei 225 Sector wise 1Y performance. Over the past year, Finance has been one of the strongest sectors in the index. Contrastingly, Producer Manufacturing, which has a high weightage in the index, has been among the underperforming sectors. This trend is likely to continue, with trade disruptions and a slowing AI rally posing headwinds to major index components. CME Group Nikkei 225 Futures CME Group’s suite of Nikkei 225 futures provide a range of instruments to express views on Japan’s benchmark equity index. Futures are available in two different contract sizes – Standard and Micro. More information on these can be found at the Nikkei 225 Futures page . Particularly, the newly launched Micro Nikkei 225 contract presents interesting possibilities for both trading & hedging exposure. Due to the smaller size, the contract requires lower margin, boosting capital efficiency for traders. For risk managers, it allows for precise hedging, reducing unwanted residual exposures. A crucial use case of these futures is the expanded trading hours in the week. Investors can trade CME Group’s Nikkei futures 23 hours a day, 5 days a week, significantly longer than the underlying cash market. This allows futures to be an effective overnight hedging tool. Chart 8: CME Micro Nikkei futures cumulative volume growth The Micro Nikkei futures are available both as a yen-denominated, and USD-denominated product. Both provide for compelling use-cases to hedge FX volatility. Investors can use the USD-denominated contract to negate any risk from movements in the yen, and trade directly using USD. Conversely, the yen-denominated contract can be deployed strategically to benefit from a strengthening yen. Technicals Signal Near-Term Bearishness Technical summary of Nikkei 225 index shows a bearish outlook on the 1D chart timeframe. This suggests potential downside in the near-term. Chart 9: Nikkei 225 technical indicator signals short-term bearish outlook In the longer-term (1-month timeframe) Nikkei 225 technical indicators show a bullish signal. Chart 10: Nikkei 225 long-term technical indicator signals bullish outlook Looking at specific technical indicators, the rebound following the tariff related decline seems to be fading with MACD and RSI, signalling a weakening trend. With Nikkei 225 trading below a key support/resistance level, strong momentum may be required to pass this level. At present, that momentum is lacking. Chart 11: Nikkei 225 RSI, Bollinger Bands, and MACD signal emerging bearish trend Hypothetical Trade Setup While Nikkei 225 has multiple long-term drivers that support secular growth, near-term risks are palpable. Tariff uncertainty, BoJ policy, and fading impact of the TSE market reforms support a short-term bearish view on the Nikkei 225. Investors can express this view by deploying a short position on Micro Nikkei (JPY) denominated futures expiring on June 13 (MNIM25). The following hypothetical trade setup provides a reward to risk ratio of 1.8x. The same view can be expressed using CME Group’s standard Nikkei (JPY) denominated contract which would scale the below P&L by 10x. Crucially, this position’s P&L is denominated in yen. The yen appreciation due to BoJ policy will further boost the USD value of this P&L, enhancing overall returns. Chart 12: Shorting Micro Nikkei (JPY) futures expiring in June (hypothetical trade setup) Entry: 37,650 Target: 36,300 Stop Loss: 38,400 Profit REACHED at Target: JPY 67,500 = ((37,650-36,300) x JPY 50), which is around ~USD 450 Loss at Stop: JPY 37,500= ((37,650-38,400) x JPY 50), which is around ~USD 250 Reward to Risk: 1.8x Trade Nikkei 225 Futures with Phillip Nova from 10 Cents/Lot* Start trading Nikkei 225 Futures with Phillip Nova from just 10 cents/lot*. Since its inception in 1983, Phillip Nova (formerly Phillip Futures) has become one of the region's top brokerages, offering access to Futures, Stocks, CFDs, Forex. ETFs and Commodities. With clearing memberships in 21 global exchanges, including CME, HKEX, SGX, and more, Phillip Nova offers you a seamless trading experience. Trade CME Micro Nikkei 225 with a lower barrier to entry.
CME:MNI1!Short
by phillip_nova
1
Ascending Triangle in Nikkei/Yen Futures: A 2025 Bullish Setup?1. Introduction The Nikkei/Yen Futures, a crucial instrument for traders aiming to capture movements in Japan’s equity index and its currency dynamics, presents an intriguing setup as we step into 2025. An ascending triangle pattern, a classic bullish formation, is emerging on the chart, signaling a potential breakout to the upside. Adding to the technical allure is the depletion of sell unfilled orders (UFOs) within a significant price zone between 40,420 and 39,685. This critical area, revisited six times since late July 2024, has seen a steady reduction of unfilled sell orders, opening the possibility for bullish momentum to dominate. With the price currently hovering near the 39,685 level, the stage appears set for a breakout opportunity. 2. The Technical Setup The ascending triangle, characterized by a series of higher lows converging toward a horizontal resistance level, often signifies bullish pressure. In the case of the Nikkei/Yen Futures, the horizontal resistance resides near 39,685, the lower boundary of a key sell UFO zone. This resistance has been tested repeatedly since July 2024, with each revisit chipping away at the sell orders within the zone. Such behavior suggests diminishing selling pressure, setting the foundation for a breakout. The anticipated target for this breakout, calculated using Fibonacci projection, is set at 41,380—aligning with historical price action and technical projections. Key Contract Specifications: o Regular Nikkei/Yen Futures (NIY1!) Contract Size: ¥500 x Nikkei 225 index Tick Size: ¥5 Point Value: ¥2,500 Margin Requirement: Approx. $ 1,500,000 JPY o Micro Nikkei/Yen Futures (MNI) Contract Size: ¥50 x Nikkei 225 index Tick Size: ¥5 Point Value: ¥250 Margin Requirement: Approx. $ 150,000 JPY These details ensure accessibility for both institutional and retail traders, with the micro contract enabling smaller capital commitments while maintaining exposure to the same underlying asset. 3. Forward-Looking Trade Plan The technical evidence supports a bullish trade plan for Nikkei/Yen Futures: Trade Direction: Long Entry Price: Above 39,685, confirming a breakout from the resistance level. Target Price: 41,380, based on Fibonacci projections. Stop Loss: 39,120, targeting a 3:1 reward-to-risk ratio to manage risk effectively. Reward-to-Risk Ratio: 3:1 (Calculated: 41,380 - 39,685 = 1,695 reward; 39,685 - 39,120 = 565 risk). The trade parameters apply to both the standard and micro contracts, offering flexibility in position sizing. Traders with smaller accounts may opt for the micro contract to manage margin requirements while engaging in this high-potential setup. 4. Importance of Risk Management Risk management remains the cornerstone of any successful trading strategy, particularly when trading leveraged instruments like futures. Here are key considerations for managing risk in the Nikkei/Yen Futures trade setup: Stop-Loss Orders: Placing a stop-loss at 39,120 ensures a predefined risk level, protecting traders from unexpected market reversals. It’s vital to adhere to this level to maintain discipline and avoid emotional decision-making. Position Sizing: The availability of micro contracts (MNIY1!) allows traders to tailor their position size according to their account size and risk tolerance. For example, trading one micro contract involves a significantly smaller margin commitment compared to the regular contract, making it suitable for retail traders. Defined Risk Exposure: Leveraged products like futures can lead to substantial losses if risk is not clearly defined. Using stop-loss orders and trading within calculated risk parameters prevents the potential for undefined losses. Precise Entries and Exits: Setting the entry above 39,685 ensures a systematic approach to triggering the trade based on the expected breakout. Similarly, targeting 41,380 using Fibonacci projections ensures that profit objectives align with technical analysis rather than arbitrary levels. By prioritizing these aspects, traders can mitigate risks while maximizing the potential reward from this bullish setup. 5. Closing Remarks The Nikkei/Yen Futures seem to be poised for a potential breakout as we enter 2025, driven by a combination of technical factors and diminishing sell-side unfilled orders. The ascending triangle formation strengthens the bullish bias, with the calculated Fibonacci projection of 41,380 offering an attractive target. Both the standard and micro contracts cater to different trader profiles, allowing participation regardless of account size. As the price approaches the critical 39,685 level, traders are encouraged to stay vigilant, using real-time CME data to track developments and validate entry triggers. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME:NIY1!Education
by traddictiv
Unlock Value in Japanese Equities Using Micro Nikkei FuturesIf you cannot beat them, join them. Activist funds are astute investors. Considering their investment strategies to position one’s portfolio can often lead to credible positive returns. But mind the risk as with any other investing strategies. Activist funds are circling around specific Japanese stocks that have significant potential to unlock value from undervalued real estate. Simply put, some listed Japanese firms have real estate whose book value is lower relative to its current market price. Activist investors are building stakes in these companies to nudge the management of these firms to unlock value. In theory, this must result in substantial gain in share price. The gap between book value and market value of real estate is massive. By some estimates, the gap is as large as 22 trillion JPY (~USD 146 billion) reports Bloomberg. THE BIG PICTURE LOOKS BRIGHT AND POSITIVE. Japanese equities have been making headlines for much of this year. Recovering from three lost decades, the Nikkei 225 index is trading at near 35-year highs. Mint Finance covered opportunities in Japanese equities early this year. We also articulated the nuanced behaviour of Nikkei 225 to the strength of the Japanese Yen. The Nikkei and the Yen are inversely correlated. Japanese equities remain bullish, but headwinds are lurking on the horizon. More on risk as we read on. THE SUMMARY DEEP DIVE. Let’s shift our lens from macro into the micro. Activist hedge funds have turned their sights on Japanese firms. Key among these have been Elliott Management Corp., Strategic Capital Inc., 3D Investment Partners, Palliser Capital, and Murakami Fund (co-founded by Yoshiaki Murakami ). Sectors with large unrealised real estate gains in Japan include land transportation (37%), construction (10%), telecoms (7%), retail (7%), utilities (6%), and warehousing (5%), as per Goldman Sachs estimate . The rest is held across various sectors. Top five firms with large unrealised property gains (excluding real estate & transport firms) as per Goldman Sachs ( reported by Bloomberg) are: SPOTTING THE TARGETS. This paper illustrates the mechanism of securing a risk hedged exposure to these stocks while minimising beta risk. Beta risk is the volatility that stems from broader equity market movements. It is the risk that the stock might lose in value because of a fall in the broader market. TradingView provides rich data including a forecast of stock prices and a summary of analyst ratings. For four of the five stocks shortlisted above, the 12-month price target and analyst ratings are summarised below. Based on analyst ratings, this paper suggests that we drop Aeon (8267) as it has a sell rating from the illustrative hypothetical portfolio while including the other four stocks. MIND THE RISK. Pursuit of returns is noble. But mind the risk. Recent elections in Japan resulted in the erstwhile ruling political party – the LDP – losing the majority seats in the lower house after 15 years. Political instability can create idiosyncratic risks impacting equity markets. Compounding political risk is the change in monetary policy stance. A hawkish Bank of Japan (BoJ) can send the Yen soaring which can adversely impact stocks. Recent BoJ’s rate hike (in July) by 25 basis points strengthened the yen by 12.4% from 10th July to 5th Aug. It unravelled the carry trade leading to a crushing 24.7% drop in the Nikkei 225 - the worst since Black Monday in 1987. The Nikkei volatility index surged from 17.8 in early July to 70.7 by early August. Shrewd investors recognise the importance of prudent risk management. In investing, setbacks are common. Withstanding and navigating risks by honing a resilient portfolio is essential to being successful over the long term. Risk avoidance is return avoidance using the wise words of Howard Marks of Oaktree Capital. Sustainable long-term returns can be generated by bearing risk intelligently. HYPOTHETICAL TRADE SETUP To that end, generating positive investment gains from Japanese firms that are holding onto undervalued real estate requires stripping away beta risk. Constructing a portfolio of stocks with beta risk eliminated requires deployment of financial instruments such as futures. Why eliminate beta risk? Stocks can and do get impacted by the broader market moves despite the significant upside potential that it might present as evident from the chart below. Portfolio beta hedging requires computing the beta of the portfolio and then establishing a corresponding hedging using an appropriate derivatives instrument to neutralise the beta effect. The residual portfolio returns post beta-hedging corresponds to pure alpha. To illustrate portfolio beta hedging, we assume that a certain fund manager plans to allocate JPY 800,000 per stock for each of the four stocks. TradingView publishes beta for each of the stocks. Beta adjusted portfolio value is as computed below. The beta published by TradingView is relative to the Topix index. The chart below shows that the CME JPY denominated Nikkei futures are tightly correlated to the Topix index. A 60-day rolling correlation hovers at near +1 most of the times with occasional break (in Jun & Jul this year) and currently stands at +0.88. The CME Group recently launched Micro Nikkei 225 Futures which has witnessed strong participation with both volumes and open interest rising sharply. This newly launched Micro Nikkei Futures achieved a cumulative volume of 150,000 contracts in one month since the launch on 28th Oct 2024. Bid/Ask spread is very tight, 1-2 ticks for Micro Nikkei (JPY) and 2-3 ticks for Micro Nikkei (USD). To beta hedge the above stock portfolio of four Japanese stocks, the fund manager will need to short one lot of CME Micro Nikkei (JPY) Futures expiring (later this month) which translates into a notional value of JPY 1,914,750 (based on the closing price as of 29th Nov 2024 of 38,295). Take note that the contract multiplier for the Micro Nikkei (JPY) contract is JPY 50 and hence the notional value of JPY 1,914,750 (38,295 x JPY 50). Before expiry, the fund manager will need to roll this short position into the next expiry which is in March 2025. The roll will involve buying back the Dec contract month while simultaneously selling the March 2025 contract. The outcome of this hypothetical portfolio can be visualised in the following possible scenarios as illustrated below. The illustration does not consider transaction costs & the cost of capital associated with (a) margins for the short futures position and (b) the capital for holding stocks. Also, take note that the six scenarios above are not exhaustive. Alpha from this trade setup is realised when stocks outperform the index. This is illustrated in scenarios 1 and 2 above. In Scenario 1, both stocks and index rise but stocks rise more than the index. The pay-off is a positive returns outcome. In Scenario 2, it is assumed that the correlation between the index and stocks break. The scenario imagines that stocks fall by 5% while the index plunges by 10%. The beta hedge negates the loss from stocks and delivers positive portfolio returns. Scenario 3 & 4 shows the outcome where the alpha fails to be realised. The stocks underperform the index, and this results in a loss in both the scenarios. Scenarios 5 & 6 illustrate a case where the stocks move in tandem with the index as per their trailing twelve months beta values. In theory, a perfect beta hedge will result in zero P&L. As the notional size of the futures and stock portfolio are not exactly equal to begin with, these outcomes result in a small positive P&L. MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme . DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME:MNI1!Long
by mintdotfinance