ASX 200 futures are a derivative contract traded on the Australian Securities Exchange (ASX). These futures give investors an indication of how the ASX 200 index – the main benchmark for Australian equities – is expected to perform when the market opens.

• If the futures are trading lower, it suggests the market will open down.
• If the futures are trading higher, it suggests the market will open up.

Let’s unpack how this works and who’s involved.

Trading Hours and Who Trades

ASX 200 futures can be traded nearly 24 hours a day, giving a continuous view of market sentiment.

The trading hours are as follows:

• 5:10 pm-7 am and 9:50 am – 4:30 pm, Monday through to Saturday.

What is a futures contract?

A futures contract is an agreement under which one party (the “buyer”) agrees to buy a certain asset or instrument at some point in the future from another party (the “seller”) at a predetermined price.

The forward-looking nature of these contracts can be interpreted to give a sense of how a market might behave in the near future.

Those involved in futures trading include:

• Institutional investors (like pension funds or mutual funds)
• Hedge funds
• High-frequency trading firms
• Individual traders

These entities are typically sophisticated investors who are looking to either hedge their exposure to the market or speculate on future price movements.

Most of the overnight trading comes from investors outside of Australia. For example, a US-based trader might see a good day of performance in the S&P 500, and then hope to continue capitalising on this gain by buying ASX futures for the next trading day.

Are Futures Tied to Specific Stocks?

No. ASX 200 futures are tied to the ASX 200 index, which contains the 200 largest public companies in Australia (including well-known companies like CommBank, BHP, and Wesfarmers).

Where can I find futures prices?

There are a few places investors can go

• The ASX website has a section for SPI futures (look at the options contract with the most volume)
• There are a few futures tickers you can find on trading platforms such as AUS200
• Most brokers (e.g. Commsec) will show futures prices before the market opens

Does the Market Follow Futures?

Generally, the market opening is aligned with the futures indication, but it’s not a guarantee. Various factors, such as company news, economic data releases, or geopolitical events can influence the market direction at the open.

The Wall Street Influence

Yes, Wall Street does have an influence on the futures.

The US stock market is the largest in the world (around  42% of global market share as of January 2023), and significant moves in indices like the Dow Jones Industrial Average or the S&P 500 can impact sentiment globally, including the ASX 200 futures.

For example, if Wall Street has a strong performance overnight, it might drive up ASX 200 futures as investors anticipate a positive start to trading.

Final Thoughts

While ASX 200 futures provide a useful indication of market sentiment before the ASX opens, it’s essential to understand they’re not a crystal ball. Markets are influenced by numerous factors, and futures are just one piece of the bigger picture.