Derivatives and Futures

Benefit from a higher-leverage investment vehicle while diversifying and hedging your portfolio. WIth our Equity Futures products, DFM offers you oil product and stock futures trading in one place.

What are Futures?

Futures are derivative contracts that allow investors to utilize higher leverage, hedge their portfolio, and benefit from short-selling and downward movements in the market.

Investors can trade futures contracts on a variety of different asset classes commodities and financial instruments to try to earn profits from price fluctuations in the market. Commodity futures allow traders to speculate on the future prices of commodities, while financial futures let traders speculate on the future prices of financial assets like stocks, bonds and foreign currencies.

Learn More

Key Benefits of Futures

Equity Futures are a great option for hedging and managing risk, and they provide a number of advantages over stocks and other investment vehicles.

Higher Leverage, Higher Profit Potential

Your initial payment is only a fraction of the contract value, enabling you to control a large value with a small amount of capital. This leverage can result in higher profits and greater capital efficiency.

Low Cost To Pay

With initial margins as low as 4% of the traded contract, you can get started with a smaller upfront investment. Fees for futures trading are also lower than fees for trading equities.

Profits When Prices Rise OR Fall

You can profit from an asset that is declining in price by selling in advance and buying back later. Likewise, you can profit from an increasing price by buying now and selling later.

Minimized Risk

Protect yourself against the risk of losses due to unfavorable price movements in the market. By locking in a guaranteed price for buying or selling in the future, you remove uncertainty and reduce the likelihood of losses.

Highly Standardised

Because all futures transactions run through a regulated exchange, there is no risk of counterparty default. Each contract contains a specific quantity and expiration date, eliminating future price uncertainty.

Fast, Flexible Entry and Exit

Futures are highly transparent and liquid, which means you can more flexibly enter and exit the market at a reasonable price, no matter which asset class you are trading.

Explore our Futures Products

With our Equity Futures products, DFM offers you oil product and stock futures trading in one place.

Single Stock Futures Get the corporate world at your fingertips with an efficient alternative to trading stocks in the Region’s leading companies. View

Oil Futures Access an efficient way to trade on the premier international energy exchange in the Middle East, with smaller contract requirements. View

Start trading Equities in 3 steps

We make trading Equity Futures easy for you. No matter your nationality or which country you are based in, you can apply to trade both DFM and Nasdaq Dubai listed securities as an individual or institution in a few simple steps.

Apply for a DFM Investor Number (NIN)

There are 3 ways you can obtain an NIN: through our DFM mobile app, by visiting the Dubai CSD Investor Affairs desk at the DFM trading floor, or through a DFM licensed brokerage. Get the DFM App

Appoint a Broker

Select and appoint a licensed broker to carry out your buying and selling transactions.
You may first want to contact the brokers, as each one offers different products and services. View Licensed Brokers

Start Trading

Once you appoint a broker, you can start trading through the options they provide.
View and track your portfolio on the DFM app or through DFM eServices.

Get the DFM App eServices

Get to know the products and contact our team to guide you through the process. Get started

Start trading through

Interested in becoming a partner? Here’s how to get started.

Become a member

Education

Get the facts about trading Equity Futures before you start.

What are Derivatives and how to invest

DFM

Introduction to DFM Equity Futures

Hassan Al Serkal

How to trade Equity Futures

Saad Al Chalabi

Equity Futures in simple way

Amr El Shamy

FAQs on Derivatives

: No, any foreign ownership limits on the company’s equity will not apply on the Futures contract.

: No, because the DFM Futures are not securities deposited with Dubai CSD. Therefore, all processes related to pledge and freeze of securities are not applicable for DFM Futures.

: Yes, as long as there is a buyer or seller, Futures can be exited at any time before the expiry date. There is no requirement to keep the Futures until expiry.

: No, because the DFM Equity Futures are not securities deposited with Dubai CSD.

: Yes, all nationalities eligible to trade in the UAE markets can trade these futures.

: No, investors should note that long position holders in Futures contracts are not entitled to any ordinary cash dividend paid on underlying shares. The price of the Futures contract discounts any expected upcoming dividend.

: Yes, a DFM Investor Number (NIN) is required to trade DFM Equity Futures.

: All Equity Futures Contracts are cash settled on a daily basis for the profit or loss calculated based on the Daily Settlement Price which is specified in the contract specification of the product.

On the expiry day of the contract all open positions are expired/closed and positions are settled for the profit and loss using the Final Settlement price on the expiry day, which will be the closing price of the underlying stock or index.

: Equities and Futures will be made available under a different board ID in the DFM Matching Engine.
The security name of Futures will have the word “FUT” to identify it as the Futures ticker.
For example, Futures on Emaar Properties for the September 2020 expiry will be “EMAAR FUT – September 2020”

: You can trade in DFM Equity Futures by:

Opening an account with one of the licensed Derivatives brokers. A list of brokers is available on the DFM website.
Place an order with the broker to either buy or sell the equity Futures contract through the available channels (e.g. calling the Broker, internet trading or mobile trading).
The trade will be placed on the Matching Engine and executed if a matching price is available. The trade value will be calculated as (No. of contracts * Contract size * price).
The investor needs to deposit the minimum Initial Margin with the broker before executing any transaction.
The trade will be registered for clearing and settlement with Dubai Clear.
Any profit or loss made due to a change in the market price is settled on a daily basis as Variation Margin.
Once a position is closed, any Initial Margins related to this position, after any profit or loss, will be released.
For investors holding the contract to expiry, the contract will be automatically closed and settled by Dubai Clear with the final settlement price.
Investors should educate themselves with product specifications, Equity Futures trading mechanics and understand the risk associated with it before starting Equity Futures trading. Investors can access videos and more on the DFM Equity Futures resource center.

: The Futures ticker will be identifiable with the Product Code, Month Code and Expiry Year. For example, Futures on Emaar Properties for September 2020 expiry will be represented as EMAARU20 where the “U” denotes the month of September (as per the below table), and the expiry year is 2020.

Month

Month Code

January

F

February

G

March

H

April

J

May

K

June

M

July

N

August

Q

September

U

October

V

November

X

December

Z

: Equity Futures contracts have a 3-month trading cycle: the near month (one), the next month (two), and the far month (three).
New contracts are introduced on the second Thursday of the near month. Each contract expires on the third Thursday of its expiry month, and a new three months contract would be introduced a week earlier of its expiry date. By this way, before the expiry day of each contract, there will be 4 contracts available for trading in the market for one week.
For example, if a new future contract listed on October 08, 2020, there would be three contracts: The first contract expires on November 19th, 2020, the second contract expires on December 17,2020, while the third contract expires on January 21 2021. On 12 November 2020, a new contract would be introduced to be expired on the 3rd Thursday of February 2021. Accordingly, there will be four contracts available for trading during the week preceding the expiry date of near month contract.

: Example A (Long Position):
On 1st September 2020, an investor feels the market will rise.

Buys 1 contract of September 2020 XYZ Future contract at AED 2.0 (contract size of XYZ Future is 100) and pays an IM of AED20 (assuming the IM is AED 20 for XYZ Future)
Between 01/09/20 and 08/09/20, the investor will need to pay VM if the Daily Settlement Price is greater than the purchase price.
09 Sep 2020,

September 2020 XYZ Future price has risen to AED 2.2
Sells off the Future contract (close the position) at AED 2.2. The investor makes a profit of AED 20 (1*100*0.2)
Example B (Short Position):
On 1st September 2020, an investor feels the market will fall.

Sells 1 contract of September 2020 XYZ Future contract at AED 2. (contract size of XYZ Future is 100) and pays an IM of AED2 (assuming the IM is AED 20 for XYZ Future)
Between 01/09/20 and 08/09/20, the investor will need to pay VM if the Daily Settlement Price is lesser than the purchase price.
9th September 2020,

September 2020 XYZ Future price has fallen to AED 1.8
Buy the Future contract (close) the position at AED 1.8. The investor makes a profit of AED 20 (1*100*0.2)

: No, DVP settlement is not applicable for Equity Futures trades.

: Yes. Selling in advance (shorting) allows an investor to profit from a stock or index that is going falling in price.

: Open Interest is the total number of outstanding contracts that are held by the market participants at the end of each day.
If both parties to the trade are initiating a new position (one new buyer and one new seller), open interest will increase by one contract. If both clients are closing an existing or old position (one old buyer and one old seller), open interest will decline by one contract. If one old client passes off his position to a new client (one old buyer sells to one new buyer), open interest will not change.
To determine the total open interest for Equity Futures, we only need to know the total from one side, buyers or sellers, and not the sum of both.

: Investors must understand that investment in Futures has an element of risk and is generally not an appropriate avenue for someone of limited resources (limited investment), limited trading experience, and low risk tolerance. An investor should therefore carefully consider whether such trading is suitable for him or her in the light of his or her financial position. An investor must accept that there can be no guarantee of profits or no exception from losses while executing orders for purchase and / or sale of Future contracts, Investors who trade in Futures at the Exchange are advised to carefully read the Risk Disclosure Document and the details contained therein. This document is given by the broker to his clients when opening the futures account. The investor must read this document, understand the implications, and sign it. The document clearly states the risks associated with trading in Equity Futures and advises investors to exercise the utmost caution before entering into the market.

: Equity Futures is a financial contract with a value agreed upon by two parties. These contracts derive their value from the value of the underlying asset, and vary based on the value of those underlying asset.

: Incentive to make profits with minimal amount of capital investment in the form of margin instead of full contract value. However, these instruments are subjected to higher risk as well.
Provides liquidity, enables price discovery in the underlying market.

: Trading in Futures carries risks for investors. It is recommended that investors seek financial advice before trading if they have limited experience. Risks include:
Leverage – Magnification of the effect of the capital can lead to significant losses, considerably more than the movement of the underlying asset.
Close out – Any open contracts are automatically closed on the expiration day by the clearing house at the Final Settlement Price.
Margin calls – Your broker may make margin calls during the term of the future, which require immediate cash settlement. Any failure to meet this margin call may result in liquidation of your positions with or without your consent.
Dividend uncertainty– Holders of Futures contracts do not receive any ordinary dividends paid by the company on underlying shares. Investors must also consider that expected dividends declared and factored into Futures prices are not certain and this may affect the profit or loss made by investors on their Futures trading.

: 10:00 am – 3:00 pm, Monday - Friday.

: DFM Equity Futures are currently traded in AED. DFM can list products in other currencies as well which would be specified in the contract specifications of the product.

: Long means buy a future contract, and Short means sell a future contract.

: Contract (lot) size represents the minimum number of units of the underlying Equities or index you buy or sell when 1 contract of Futures is bought or sold. For example, if the product specification of Single Stock Future says that the Contract size is 100 then it means when 1 contract is bought or sold, it is equivalent of buying or selling 100 shares of that underlying.

: Your position will be automatically closed and settled by the clearing house on the last trading day based on the final settlement price. The investor will be charged expiry settlement fees for any open positions closed by the clearing house.

: On expiry date, the Futures Settlement Price is calculated based on the stock or index closing price. Any profit or loss is calculated based on this price and settled accordingly. All open Futures Positions expire on this date and Initial Margins are returned. Investors can ‘rollover’ their Futures position by closing their open position on or prior to maturity and entering into a new contract to maintain their positions in the Futures.

: It is the last day on which the contracts expire. Futures contracts expire on the third Thursday of the expiry month. If the third Thursday is a trading holiday, the contracts expire on the previous trading day.

: To take Long or Short position in a future contract, the client needs to deposit a minimum amount of acceptable collateral as an Initial Margin with the Broker. Initial Margin rates are as prescribed by Dubai Clear. However, Brokers have the right to ask for a higher Initial Margin depending on the risk profile of the client. When the client closes the position (sell to close Long position and buy to close Short position), the balance of the Initial Margin is released.
Example:
On September 1, 2020, an investor buys a 200 contracts of XYZ company at a price of AED 2.00 September 2020 expiry.
Contract Size is 100 and Initial Margin is AED 20 per contract.
Expiry day of the contract will be 17 September 2020
The contract value is AED 40,000 (200 * 2 * 100)
The investor pays only AED 4,000 as Initial Margin (200*AED20).

: The Futures price can fluctuate on a daily basis, which can create a profit or a loss to the open Futures position. The Variation Margin is the settlement for the daily profit or loss arising from the marking to market the purchase price of the open Futures position against the Daily Settlement Price.

: With Equities, the investor owns the stock of a listed company, they hold voting rights and are entitled to receive cash dividends. In equities, an investor can only go short in for selected equities subject to borrowing requirements.
Whereas with Futures, there is no ownership of the stocks, the investor has no voting rights and is not entitled to receive cash dividends. Going short for futures is possible and can achieved by taking a sell position in the futures contract compared to going short in the underlying share.

: A market maker provides liquidity to the market. Market makers are financial institutions that simultaneously offer both Bid and Ask prices for the contract.

: All types of investors are allowed to trade on DFM Equity futures. Example, all Individuals, institutional, funds, corporate clients, etc. A suitability assessment will be completed by the licensed DFM Equity Futures Broker.

: No, SMS will not be sent by DFM for Futures trades. Investors will receive updates and trade confirmations directly from their Trading Member.

: No, the DFM Equity Futures are cash settled contracts and therefore their trades will not be reflected in the Dubai CSD Statements.

Month	Month Code
January	F
February	G
March	H
April	J
May	K
June	M
July	N
August	Q
September	U
October	V
November	X
December	Z