FIN645 Trial GAME Report Group Assignment PDF

Preview

Summary

TABLE OF CONTENT ACKNOWLEDGEMENT CONTENTS PAGE 1 INTRODUCTION 2 Crude Palm Oil Futures (FCPO) 2 LIST OF INSTRUMENT AND COMMODITIES 2 FTSE Bursa Malaysia KLCI Futures 3 ROLES AND RESPONSIBILITIES OF GROUP MEMBERS 4 Fundamental Analysis 4 FACTORS THAT DETERMINE THE PRICE OF FINANCIAL INSTRUMENT 4 Tech...

Description

TABLE OF CONTENT

CONTENTS

PAGE

ACKNOWLEDGEMENT

2

1.0 INTRODUCTION

3

2.0 LIST OF INSTRUMENT AND COMMODITIES 2.1 Crude Palm Oil Futures (FCPO)

4

2.2 FTSE Bursa Malaysia KLCI Futures

4

3.0 ROLES AND RESPONSIBILITIES OF GROUP MEMBERS

5

4.0 FACTORS THAT DETERMINE THE PRICE OF FINANCIAL INSTRUMENT 4.1 Fundamental Analysis

6

4.2 Technical Analysis

6

5.0 OVERALL TRADING PERFORMANCE

7

6.0 MOST PROFITABLE AND MOST UNPROFITABLE TRADE

8 - 12

7.0 STRENGTH AND WEAKNESS

13

8.0 STRATEGY FOR FUTURE TRADING GAME

14

9.0 CONCLUSION

15

10.0 REFERENCES

16

ACKNOWLEDGEMENT In the name of Allah, the Most Gracious and the Most Merciful All praises to Allah and His blessings for the completion of this report. I thank God for all the opportunities, trials and strength that have been showered on us to finish this report. My humblest gratitude to the holy Prophet Muhammad (Peace be upon him). In performing our report, we had to take the support and guideline of some esteemed people, who deserve our greatest appreciation. The success of this mission brings us much joy. We would like to express our appreciation to Madam Syukriah Ali Course Instructor, University Teknologi Mara (UiTM) for providing us with a strong assignment guideline during various consultations. We would also like to express our heartfelt appreciation to everyone who has helped us, both directly and indirectly, with this report. We also thank the Universiti Teknologi Mara (UiTM) for consent to include copyrighted pictures as a part of our paper. Many people, especially our classmates and team members itself, have made valuable comment suggestions on this report which gave us an inspiration to improve our report. We thank all the people for their help directly and indirectly to complete our report.

2

1.0 INTRODUCTION Futures and options known as a classification of stock derivatives being traded in stock market. Its have been listed by two parties in order to trade a stock asset on future date at fixed price. To reduce market risks this contract will confined the price in advanced. Futures and option will help trader to minimize future risk by predetermined prices. But sometimes, the direction movement of price cannot be predicted because it can give a huge impacts on profit and loss. Moreover, through an option the buyer have right whether to buy or sell on specific price before closing date. While, a futures contract make a buyer to have a responsibility to purchase certain assets, make a seller to sell that certain assets on specific future date except if its closed to expiration. During the trial game trading period starting on 1st April 2021 until 16th April 2021, students have been given 100 maximum trade with no brokerage fee. By obtaining a RM 100,000 students are allowed to trade a futures contract to gain profit. The list of trading asset that provided are Crude Palm Oil (FCPO) which it’s a contract between a seller and buyer in order to delivery respectively of Gold Futures (CPO). Next, Kuala Lumpur Composite Index Future (KLCI) is a former name of Malaysian stock exchange that located in Kuala Lumpur was created to allow the trading of Malaysian Securities. Trading in futures contract is much better than stock is because its help to maximize the effectiveness of the underlying market because futures contracts reduce unexpected price of buying an asset completely.

3

2.0 LIST OF INSTRUMENTS AND COMMODITIES 2.1 FCPO FCPO is a derivative contact between the buyer and the seller to take and make delivery respectively of Crude Palm Oil (CPO) at a future date. It is an actually established contract, which means that after the expiry of the contract, the buyer and seller would have to take and make delivery respectively of the physical CPO. While for the delivery point, it can be made at the option of the seller at registered Port Tank Installations (PTIs) which located at Port Klang, Butterworth and Pasir Gudang. For the delivery period, it is from the 1 st business day until the 20th day of the spot or delivery month. The delivery period also can be change to on the preceding business day if the 20 th is a non-business day. However, the day of delivery of the CPO is at the choice of the seller.

2.2 FKLI FKLI is a Ringgit Malaysia (“MYR”) denominated FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) Futures contract traded on Bursa Malaysia Derivatives providing the participants in the market exposure to the underlying FBM KLCI components. It is actively used by both the institutional and retail investors in their respective trading portfolios. The cash settlements for FKLI are in MYR. While for the contract size is FBM KLCI multiplied by MYR50.

4

3.0 ROLES AND RESPOSIBILITIES OF GROUP MEMBERS During the futures trading activities, every member in the group had their own roles and responsibilities to trade and survey how to choose the futures contracts. Besides that, the leader always reminds each of the member to be aware with the last date to trade. On the other hand, the other group members also keep on reminding each other to trade every day.

The group member would also remind each other to check on the daily profit or loss of the futures in the Bursa Marketplace. This action is very important for the team to make a further action whether to close out the futures contract or not where we close a contract that incurred loss and hold the futures contract that gain profits. Besides, the members also would update on their current trading activities so that the other members could correct and give suggestion towards each other for a better trading result.

5

4.0 FACTORS THAT DETERMINE THE PRICE OF FINANCIAL INSTRUMENT 4.1 Fundamental Analysis A trading strategy need a strong method and plan in order to gain profit. By using a right and perfect method in trading a future contract a trader most likely to be successful. Fundamental is one of the most common method that all the trader apply that could influence the price of contract in the futures. Fundamental analysis more focus on external events and influences including financial statement and industry trends. It is have many kind of tools and techniques to be applied. Which is a top-down analysis where trader look out on the broader view of economy and bottom up analysis is on a specific stock enlarge to consider all the factors that affect the price rise and fall. Our group members decided to focus on the amount of company’s earnings report such a revenue. It helps us to gather the right information to make our plan better about what to do.

4.2 Technical Analysis Each of the group members also decided to apply technical analysis in trial games as a starting point to implementing and understanding technical trading system toward our strategy planning. This is because technical analysis helps to expect the future price movements, with a full information that helps us to make profit. We apply this method tools to a chart, so that we can clearly acknowledge the entry and exit points for certain potential trades. More benefit situation on this technical analysis method is because the information provided is came from the price chart itself. Indirectly, we able to gain profit in short period of time.

6

5.0 OVERALL TRADING PERFORMANCE

Student name

Trading profit/loss

Nur Raihanna Syafiqah

RM 5,700

Binti Roslan Nurul

Balqis

Binti

-RM 925

Zakariah Nazatul

Farahanim

-RM 3,600

Trading simulation activity =∑trade done x 20 Max of no. Trades

= 5,700 x 25

= 5,700 x 100

= 13 x 20

100,000

100,000

100

= 1.425 = - 925 x 25

= 5.7% = - 925 x 100

Fasihah

= - 0.2313 = - 3,600 x 25 100,000

Binti

-RM 1,975

Sapri Husna

ROI (%) =∑trading profit/loss x 100 ∑deposit

100,000

Binti Fakhrulrazi Nurul

Return maximization =∑trading profit/loss x 25 ∑deposit

= - 0.9 = - 1,975 x 25 100,000

Izzati

Binti

-RM 1,375

Saridun

= - 0.4938 = - 1,375 x 25 100,000 = - 0.3438

= 2.6 = 4 x 20

100,000

100

= - 0.93% = - 3,600 x 100 100,000

100

= - 3.6% = - 1,975 x 100 100,000 = - 1.98% = - 1,375 x 100 100,000 = - 1.38%

= 5.4

5.7 5 4 3 2 1

-4

-0.93

-1.38 -1.98 -3.6 Husna

7

= 0.6 = 27 x 20 100

6

-2 -3

= 0.6 = 3 x 20 100

Return on Investment (ROI) %

0 -1

= 0.8 = 3 x 20

6.0 MOST PROFITABLE AND UNPROFITABLE TRADE

NUR RAIHANNA SYAFIQAH BINTI ROSLAN

The most profitable trade that I made is June FCPO 2021. The position that I made is long position on 2nd April 2021 with the price of RM 3,574 and it has a high volatility during the trading period. I gained profit of RM 1,600 a day later and I manage to gain more profit everyday since the FCPO price is always in uptrend. I also manage to gain the highest profit for several days. While the most unprofitable trade that I made are July FCPO 2021 and August FCPO 2021. This is because during few days before trading period ended, most of FCPO prices fell drastically to RM 3,491 and RM 3,384 from RM 3,663 and RM 3,532. This has caused me a great loss. I tried to trade more and hoping that the price will recover very soon but it turned out I faced a greater loss. Hence, I closed my position to keep me from facing another losses.

8

NURUL BALQIS BINTI ZAKARIAH

For the futures trading activity, I was unable to gain more profits as I only traded four futures contracts which are FCPO June 2021, FCPO July 2021, and two futures contracts for FKLI June 2021. The most profitable futures contract is FCPO June 2021, I buy the contract on long position when the price was RM 3768.00 and rise later to RM 3800.00. Which I was able to gain gross profits of RM 32.00 and able to cover up for my loss and reduce the loss that I gains. While for the most unprofitable futures contract is FCPO July 2021 which I bought the contract on short position when the price was RM 3572.00 then drop to RM 3450.00 and resulted to gain gross loss at RM 409.00.

9

NAZATUL FARAHANIM BINTI FAKHRULRAZI

One of the most profitable trades that I had FCPO 6 April 2021 where I get the profit RM 275.00. But I make a hasty decision to close the contract as soon I get the profit. I gain the contract on that day because I manage by going long after forecast the price for FCPO future in Bursa marketplace that it going uptrends. So, I make a decision to buy the FCPO market on that day. Second, I trade two in FCPO but in the different month and both of contract are loses. The most unprofitable trades is in FCPO 15 November 2021 Where I loses over RM 2,525 on that day. But I did not close yet because I totally sure the price is going to increase for next day. Unfortunately, the price is fall more and more.

10

NURUL FASIHAH BINTI SAPRI

From the futures trading activity, I was unable to gain much profits since I have only traded a total of three futures which is FKLI September 2021, FCPO June 2021 and FCPO August 2021. Out of three futures traded, the only futures that I am able to gain profits is FCPO June 2021. I was able to gain a profit of RM 2,950 from the futures because I went for a long position. The reason for choosing the long position for that particular futures is because the price of FCPO futures is having an uptrend. Besides, the most unprofitable of futures trade from my trading activities is FCPO August 2021. At first, I gain some profits from the futures but then the prices keep on falling. Since I was expecting the price to increase in the future, I did not close out the futures. However, my expectation went all wrong as the price keep on falling instead of rising. Therefore, l had suffered an amount of RM 4,125 losses from this futures trading.

11

HUSNA IZZATI BINTI SARIDUN

Throughout my trading session for almost 3 weeks, the trade that I have been done is 27 trading leading me on ranking 49. As I can conclude, one of the most profitable trade during my trading session are FCPO in July, August and September 2021. Which I gain three thousand ringgit during that times. Especially, during 14 until 16 of April FCPO chart percentage getting higher time to time. Due to this uptrend of FCPO, I decided to hold the contract till the end of the trial end day. Its help me to cover up my loss during my first week of trial games which almost RM 20,000. This is because I have made a mistake in trading on unprofitable contract which is FCPO August. The mistake that I have been make is I did not observe on the price during the trade. I have trade FCPO August when the price is ultimately downtrend which lead me to huge impact of loss. I also take a short thinking by close the contract immediately. I should have hold the contract until in rise again in future since I buy the long position one.

12

7.0 STRENGTH AND WEAKNESS Throughout the trading process, we had found our strength and weakness. There are a few strengths of our group in which benefits us in the futures trading process. The first strength is having a clear goal. Our group has a definite goal and mindset from the beginning until the end of the trading activity which is to gain a huge profit. By having a clear goal, we had become more prepared in terms of making plans to achieve the goals. These plans play a very important role in order to avoid all the uncertainty that could happen in the market as we are all prepared for the outcomes. The other strength of our group is we also make a study and research on the futures market. It is very important to have a knowledge of the market before making any transactions. Before participating in the trading, we did some research and study on the trends and patterns of futures markets. Our group were also able to identify some weaknesses in the futures trading activity. The first weakness is making a rush decision. We found that we were always making a rush decision by doing a transaction without thinking thoroughly. We still make a decision by purchasing futures contract despite knowing the facts that the prospects of the investment do not match with our research and study. We also make a rush decision by closing up our futures contract too early. Therefore, we gain nothing from some of the transactions done. Besides, we are also having an unrealistic expectation towards the market. Our group are giving a high expectation on the market by making a transaction and expect that the trading activity will definitely going to gain us a lot of profits.

13

8.0 STRATEGY FOR FUTURE TRADING GAME Futures are financial futures contracts that allow the buyer or seller to purchase or sell an asset at a predetermined price and date in the future. The futures market was initially developed to meet the needs of commercial traders. There are many types of strategy of future market that we can followed. One of it is, the Pullback strategy. The pullback strategy is one of the strategies that we followed in order to buy or sell the future contract. It is an effective futures trading strategy that focuses on price that occurs in a trending market when a stock breaks above or below a resistance level, reverses, and retests the broken level. During an uptrend, then reverses and retests the level where the price is above a defined resistance level. When the price falls below a well-established support level, then reverses and retests the level this is where the downtrend occurs. This is a pullback, and we as the dealer will take a short position against the underlying downtrend. So, we will take the opportunity to buy the future contract when the price is low in order to gain profit. Next strategy that can be use is ‘going long’. The going long is the strategy where we can buy the future contract when the price of underlying commodity to increase over certain period of time. Forecasting the price's course and timing change is accurate, sell the future contract later with higher price when the price is expected to face loses. So, using this strategy, we will able to gain a lot of profit buy buying the future contract when the price is expected to high and sell the contract when it loses. Buyer and seller interest also one of the good strategies that can be followed. Meaning that the interest of the seller or buyer toward the contract will make them to research about the futures that they are going to buy. The data of buyer and seller are utilized by trader, the buyer and seller decision whether to sell or buy future contract. The Depth of Market window, which displays the number of available buy and sell orders for a futures contract at various price levels, determines buyer and seller interest. With this, we normally will always monitor the Bursa Marketplace in order to see the graph of financial analyst of future market is rises or fall. If low, we will make a decision to buy and rises will sell. Lastly, the strategy of the future market is not closing the contract at loses to early. This is because when we close the contract at a loss, the funds are deducted from the trader's account, and their account balance decreases. When a contract is closed, the margin used for that trade is

14

no longer used, and that margin is now available if the seller wishes to position another futures order.

9.0 CONCLUSION As a conclusion, FCPO is a derivative contract between a seller and a buyer that required them to take and to make the delivery of Crude Palm Oil (CPO) respectively at a future date. FKLI on the other hand is a Ringgit Malaysia (MYR) that denominated FTSE Bursa Malaysia Derivatives Composite Index (FBM KLCI) futures contact which is traded on Bursa Market Derivatives. In the futures trading activities, our group has traded on multiple FCPO and FKLI futures in short position and long position. Although we traded on many futures, we are only able to gain profits from a few futures. During the futures trading activities, we notice that each of our group member had traded FCPO June 2021 the most and it turns out to be the most profitable futures within our group. We also found that it is quite hard for us to gain profit since it is our first time doing a futures trading. As for the next futures trading activities, we will make sure that the strategy is well prepared and well organized so that all members could gain more profits and reduce loss.

15

10.0 REFERENCES

1. Bursa Market Place. Bursa Market Place. (2021). Retrieved 21 April 2021, from https://www.bursamarketplace.com/index.php.

2. Konchar, P. (2021). 7 Best Futures Trading Strategies You Can Use (And 3 to Avoid!) My Trading Skills. My Trading Skills. Retrieved 21 April 2021, from https://mytradingskills.com/futures-trading-strategies. 3. Futures and Options (F&O) - Definition and Types of Futures and Options. Groww. (2021). Retrieved 21 April 2021, from https://groww.in/p/futures-andoptions/#:~:text=Futures%20and%20options%20are%20the,price%20on%20a%20later %20date.&text=Futures%20and%20options%20basics%20provide,investment %20through%20pre%2Ddetermined%20prices. 4. (2021). Retrieved 21 April 2021, from https://www.bursamalaysia.com/sites/5bb54be15f36ca0af3...