Investment in the DAX Future even with little capital
The DAX, which has now been calculated for 30 years, is the leading barometer for the German stock market. Today, there are a large number of investment and trading instruments that offer access to index development. Investors can invest according to their taste and risk. The product range includes ETFs, leverage certificates and DAX futures.
In the summer of 2017, the index moved to over 12,000 points. With a contract value of 25 euros per index point, a DAX futures contract reached a total equivalent value of 300,000 euros at this level, making it one of the heaviest equity index futures in international comparison.
In order to invest in the DAX futures, however, only a security deposit is required, which represents only a fraction of the contract value. This creates a leverage effect which can have a positive, but also negative, effect on the investor. The initial security to be deposited (so-called margin) amounts to approximately 20,000 euros per contract.
Therefore DAX futures as a trading instrument in its original form are usually too expensive for private investors. For traders who use the DAX futures to hedge structured products or funds, fine tuning is becoming increasingly difficult as the DAX index rises.
Many private investors who want to trade with leverage therefore resort to CFDs (Contracts for Difference). However, they therewith accept - consciously or unconsciously - additional risks.
Both for the purchase of futures and for the purchase of CFDs, only a security deposit is required. However, there are some important subtleties that distinguish the two products. In contrast to futures trading, CFD trading neither has a central counterpart that minimizes the issuer's default risk nor independent market monitoring. In addition, the leverage of CFDs is often significantly higher than with futures, with correspondingly high chances of winning, but also a correspondingly high risk of loss.
CFDs are usually traded against the issuer of the products themselves, unlike listed futures, which are traded against a large number of other market participants and market makers. These must adhere to the rules laid down by the stock exchange in order to ensure neutral and comprehensible pricing. In times of crisis, spreads (the difference between purchase and sale prices) in CFDs can often vary widely; in extreme cases, prices are no longer quoted at all.
Futures and leverage products also have some similarities: both can be traded at the stock exchange and investors therefore benefit from the advantages of market supervision by a neutral body and trading against market participants and market makers and not against the issuer. In addition, trading margins are narrow.
A significant difference between an investment in a futures contract and an investment in a comparable leverage product is the required investment amount. As already described above, the purchase of a DAX futures contract currently requires a security of at least 20,000 Euros. Warrants and leverage certificates, on the other hand, can be purchased for small amounts.
In addition, leverage products are much easier for private investors to buy and sell by simply placing an order from a bank or an online broker, while buying a futures contract is more complicated. All brokers offer access to trading on the Frankfurt Certificate Exchange, for example, but only a few allow trading on Eurex.
To illustrate for whom futures and leverage products are generally suitable, one could compare the purchase of a futures contract with the purchases of a greengrocer in the wholesale market hall. He buys large quantities for his assortment in the shop. The prices and offers in the wholesale market hall are therefore tailored to the customers of large quantities: Minimum purchase quantities, special payment methods, etc. The greengrocer, in turn, offers the products at the weekly market, where he rents his stand from the market operator. The products and prices are specifically tailored to end customers so that they can easily buy small quantities as required.
Issuers of leverage products are therefore the retailers who hedge and cover themselves at Eurex in order to be able to offer corresponding products to private investors on the end customer side.
The Mini-DAX future is aimed in particular at well-informed and risk-conscious private investors seeking a liquid, cost-effective, safe and transparent alternative to over-the-counter products.
Der Mini-DAX-Future future is an easily tradable product for everyone who
- seeks comparatively lower investment amounts than institutional investors and traders with large volumes,
- wants to benefit from fluctuations in the DAX in both directions
- wants to hedge smaller positions and
- wishes to use the security of the stock exchange and still keep an eye on costs.
Like all listed securities, investors can buy Mini-DAX futures from selected banks and online brokers offering Eurex connectivity.
A list of all currently affiliated banks and online brokers
© 8 August 2018, Edda Vogt
Mini-DAX-Future with all benefits of stock trading
- Liquid order book with several market makers.
- Transparency and neutrality through clearly defined rules, which are checked by a neutral authority.
- Security of execution by the Clearing House Eurex Clearing