1
00:00:03,680 --> 00:00:06,000
Speaker 1: Welcome to Ask Fear and Greed, where we take your

2
00:00:06,080 --> 00:00:08,879
Speaker 1: questions and do our best to answer them. I'm Michael Thompson,

3
00:00:09,000 --> 00:00:10,760
Speaker 1: and good afternoon, Sean Aylmer.

4
00:00:10,960 --> 00:00:12,080
Speaker 2: Good afternoon, Michael.

5
00:00:12,480 --> 00:00:15,560
Speaker 1: Sean today. I was going to describe this one as

6
00:00:15,560 --> 00:00:18,280
Speaker 1: a bit of a doozy, but there's a bit to it.

7
00:00:18,280 --> 00:00:21,119
Speaker 1: It comes from Linus today's question. He's sent it in

8
00:00:21,200 --> 00:00:23,240
Speaker 1: via the website. There's multiple options. You can do it

9
00:00:23,239 --> 00:00:27,560
Speaker 1: by Facebook or Instagram LinkedIn all the website fearangreed dot Com.

10
00:00:27,600 --> 00:00:29,560
Speaker 1: Today you which is what Linus has done. He says,

11
00:00:29,600 --> 00:00:33,360
Speaker 1: Good morning, Michael, and Sean put me first. Please don'te that.

12
00:00:33,360 --> 00:00:38,400
Speaker 1: Sean says, gentlemen, a question, if I may Each weekday,

13
00:00:38,760 --> 00:00:41,880
Speaker 1: the markets refer to the ASEX open via the asx

14
00:00:42,120 --> 00:00:48,800
Speaker 1: SPI futures futures contracts. But what are the actual futures contracts?

15
00:00:49,200 --> 00:00:54,000
Speaker 1: What constitutes futures contracts? And what do they measure? Or

16
00:00:54,040 --> 00:00:58,920
Speaker 1: perhaps more correctly, how do the futures manifest themselves as

17
00:00:58,960 --> 00:01:03,760
Speaker 1: a points measure? I'm presuming that there is an index

18
00:01:03,800 --> 00:01:06,840
Speaker 1: that allows a points measure to be compared on a

19
00:01:06,880 --> 00:01:11,600
Speaker 1: moving basis day to day. He says, thank you, gentlemen,

20
00:01:11,959 --> 00:01:14,280
Speaker 1: and he says, well done to you both, and the

21
00:01:14,360 --> 00:01:20,040
Speaker 1: young Adam Lang referring referring to our colleague who judges

22
00:01:20,160 --> 00:01:24,039
Speaker 1: us on the Fear and Greed Weekend edition. It's been

23
00:01:24,080 --> 00:01:28,920
Speaker 1: many many moons since Adam lanyone you, young Adam Lange anyway,

24
00:01:29,040 --> 00:01:30,560
Speaker 1: is not here to defend himself, so I won't sled

25
00:01:30,640 --> 00:01:33,639
Speaker 1: you any further. Sean, what do you think of this question?

26
00:01:35,360 --> 00:01:38,680
Speaker 2: It's good, it's good. It's good. I think he's answering

27
00:01:38,680 --> 00:01:43,199
Speaker 2: the question himself, though, So what's a future's contract? It's

28
00:01:43,240 --> 00:01:46,480
Speaker 2: all it is is a contract, an agreement to buy

29
00:01:46,680 --> 00:01:51,120
Speaker 2: or sell an asset at a specific price on a

30
00:01:51,200 --> 00:01:54,880
Speaker 2: specific date in the future. That's why it's futures. So

31
00:01:55,080 --> 00:01:57,720
Speaker 2: you could be a commodity, it's the future's contract for gold.

32
00:01:57,840 --> 00:02:01,200
Speaker 2: Could be equity, which is what we the spy SPI.

33
00:02:02,280 --> 00:02:05,720
Speaker 2: It could be some other financial instrument. So these indexes

34
00:02:05,800 --> 00:02:09,800
Speaker 2: cover all sorts of different classes. They used to be

35
00:02:09,880 --> 00:02:12,760
Speaker 2: for institutional shareholders for a bunch of reasons you'll come

36
00:02:12,800 --> 00:02:16,600
Speaker 2: to in a moment. Though nowadays people can trade on

37
00:02:16,800 --> 00:02:21,320
Speaker 2: the ax SPI futures spy futures, so you can buy

38
00:02:21,440 --> 00:02:25,120
Speaker 2: onto that. It is just an index. So when Linus

39
00:02:25,160 --> 00:02:28,799
Speaker 2: talks about an index, it allows the points measure to

40
00:02:28,800 --> 00:02:31,080
Speaker 2: be compared on a moving basis day to day. That's

41
00:02:31,120 --> 00:02:33,280
Speaker 2: exactly right. So it's just an index, like the AX

42
00:02:33,360 --> 00:02:37,560
Speaker 2: is an index. But what it is is measuring how

43
00:02:37,680 --> 00:02:42,040
Speaker 2: people are viewing and buying and selling futures contracts. And

44
00:02:42,040 --> 00:02:46,280
Speaker 2: remember futures contracts. So what today's Tuesday, It's just I'm

45
00:02:46,320 --> 00:02:49,239
Speaker 2: just saying in the first Tuesday in January a month's time,

46
00:02:49,919 --> 00:02:52,040
Speaker 2: I want to buy a BHP or sell BHP for

47
00:02:52,080 --> 00:02:56,520
Speaker 2: a certain price. So that's all that does. Why do

48
00:02:56,560 --> 00:03:00,240
Speaker 2: we use them? So it allows you to be on

49
00:03:00,280 --> 00:03:03,040
Speaker 2: the direction of a market without actually putting as much

50
00:03:03,080 --> 00:03:06,880
Speaker 2: money up. So if I want to buy my BHP

51
00:03:07,360 --> 00:03:09,600
Speaker 2: shares or I want to go into into a contract,

52
00:03:10,280 --> 00:03:15,720
Speaker 2: and let's say BHP, let's say's trading at thirty bucks.

53
00:03:16,400 --> 00:03:18,400
Speaker 2: Let's say, and I think it's going to be thirty

54
00:03:18,400 --> 00:03:20,720
Speaker 2: five bucks. So I might enter a futures contract to

55
00:03:20,720 --> 00:03:26,440
Speaker 2: buy BHP shares in a month's time. It costs the

56
00:03:26,720 --> 00:03:30,079
Speaker 2: thirty and I set the price today about what I'm

57
00:03:30,080 --> 00:03:32,080
Speaker 2: going to pay in a month's time. That's probably the

58
00:03:32,120 --> 00:03:36,200
Speaker 2: important part there. So that kind of you can bet

59
00:03:36,560 --> 00:03:40,720
Speaker 2: on benefiting from BHP if you think that it's going

60
00:03:40,720 --> 00:03:43,200
Speaker 2: to rise and it's cheaper now than you can take

61
00:03:43,200 --> 00:03:45,040
Speaker 2: a bet on that. So that's one way. That's one

62
00:03:45,080 --> 00:03:47,840
Speaker 2: benefit of it. Another thing is if I own lots

63
00:03:47,880 --> 00:03:51,520
Speaker 2: and lots of BHP stock, maybe I've got too much

64
00:03:51,560 --> 00:03:54,600
Speaker 2: BHP stock, So maybe I want to take a bet

65
00:03:54,680 --> 00:03:56,760
Speaker 2: that I'm going to sell my BHP shares in a

66
00:03:56,760 --> 00:03:59,240
Speaker 2: month's time just to offset the fact that I own

67
00:03:59,320 --> 00:04:02,200
Speaker 2: so many of them. So that's another reason that people

68
00:04:02,240 --> 00:04:08,720
Speaker 2: tend to hold futures contracts, the SPY two hundred futures.

69
00:04:08,720 --> 00:04:10,520
Speaker 2: That was another part of it. I mean that that

70
00:04:10,920 --> 00:04:13,320
Speaker 2: is kind of there's a numerical thing. Off the top

71
00:04:13,360 --> 00:04:15,000
Speaker 2: of my head. I think it's like twenty five dollars

72
00:04:15,000 --> 00:04:18,200
Speaker 2: in cash for each index point, and so the value

73
00:04:18,200 --> 00:04:22,480
Speaker 2: of the market is worked out on that, and that's

74
00:04:22,480 --> 00:04:25,279
Speaker 2: how you work out your SPY futures contract. I'm not

75
00:04:25,320 --> 00:04:26,719
Speaker 2: quite sure that I'm answering the question.

76
00:04:27,240 --> 00:04:29,040
Speaker 1: I think so it feels like there there are multiple

77
00:04:29,120 --> 00:04:31,479
Speaker 1: parts to it, And what I kind of took partly

78
00:04:31,560 --> 00:04:35,080
Speaker 1: is kind of how is this used to predict where

79
00:04:35,120 --> 00:04:38,520
Speaker 1: the market is going to go? When the market opened

80
00:04:38,640 --> 00:04:39,560
Speaker 1: each day because.

81
00:04:39,360 --> 00:04:43,159
Speaker 2: You often yeah, okay, so I haven't actually addressed that,

82
00:04:43,520 --> 00:04:45,919
Speaker 2: and we will often say on a Monday morning, you know,

83
00:04:46,000 --> 00:04:50,320
Speaker 2: futures trading suggests blah, and what it means is over

84
00:04:50,320 --> 00:04:53,880
Speaker 2: the weekend or you know, fright following Wall Street, people

85
00:04:53,880 --> 00:04:57,599
Speaker 2: have taken out contracts and they expect the market to

86
00:04:57,920 --> 00:05:01,640
Speaker 2: open down and it may or may not do that.

87
00:05:01,680 --> 00:05:06,279
Speaker 2: Often often it actually follows the futures contract in the

88
00:05:06,320 --> 00:05:10,120
Speaker 2: first few minutes, but then lots of news hits and

89
00:05:10,600 --> 00:05:13,640
Speaker 2: people report to the AX and so it either continues

90
00:05:13,680 --> 00:05:15,919
Speaker 2: that way or as the opposite way. So quite often

91
00:05:15,960 --> 00:05:18,840
Speaker 2: you see this change in direction where futures saying this,

92
00:05:19,000 --> 00:05:20,599
Speaker 2: but because of the news of the day, it turns

93
00:05:20,600 --> 00:05:21,600
Speaker 2: out the opposite.

94
00:05:21,680 --> 00:05:23,719
Speaker 1: I was never sure how much of those predictions was

95
00:05:23,760 --> 00:05:26,440
Speaker 1: based on kind of futures and how much was based

96
00:05:26,440 --> 00:05:29,960
Speaker 1: on just the raw performance of say Wall Street and

97
00:05:30,000 --> 00:05:32,400
Speaker 1: the leading that you get from from that market.

98
00:05:32,680 --> 00:05:37,400
Speaker 2: Yeah, where the big difference is. So futures do reflect

99
00:05:37,480 --> 00:05:43,000
Speaker 2: Wall Street often, So that's true. But what futures buyers

100
00:05:43,000 --> 00:05:46,120
Speaker 2: and sellers don't know is whatever's going to come out

101
00:05:46,160 --> 00:05:49,279
Speaker 2: on the AX in the morning that opens at eight am.

102
00:05:49,400 --> 00:05:51,880
Speaker 2: Trading starts at ten am. There's two hours worth of news.

103
00:05:52,560 --> 00:05:56,680
Speaker 2: And if something like yesterday we ended up with Northern

104
00:05:56,720 --> 00:06:00,480
Speaker 2: Star coming out buying Degray Mining, right, if you had

105
00:06:00,520 --> 00:06:02,479
Speaker 2: actually thought the Gray Mind is not going to do

106
00:06:02,600 --> 00:06:04,480
Speaker 2: very well over the next two months, I'll take a

107
00:06:04,520 --> 00:06:08,200
Speaker 2: future's contract. You would really have done your money big time.

108
00:06:08,480 --> 00:06:10,440
Speaker 2: But if you had bought them, you'll do really well

109
00:06:10,440 --> 00:06:10,800
Speaker 2: out of it.

110
00:06:11,600 --> 00:06:15,400
Speaker 1: I reckon, I reckon. We've answered Linus's question. I'll say

111
00:06:15,400 --> 00:06:18,520
Speaker 1: that much. I reckon, we have probably answered a few

112
00:06:18,600 --> 00:06:21,440
Speaker 1: questions that weren't actually asked as well.

113
00:06:21,480 --> 00:06:22,360
Speaker 2: I apologize.

114
00:06:22,560 --> 00:06:25,599
Speaker 1: No, it's good. It's an educational experience. One day we

115
00:06:25,640 --> 00:06:27,440
Speaker 1: will look back in ten years time and we will

116
00:06:27,440 --> 00:06:30,359
Speaker 1: have ten years worth of ask fear and greeds. Yeah,

117
00:06:30,480 --> 00:06:33,000
Speaker 1: and you could basically just take them into any university

118
00:06:33,080 --> 00:06:36,680
Speaker 1: and just go here you go, guys, here, here's the syllabus.

119
00:06:36,960 --> 00:06:39,040
Speaker 2: That one's good. I wouldn't listen to that one.

120
00:06:39,720 --> 00:06:41,360
Speaker 1: Skip that one. I don't think they knew what they

121
00:06:41,400 --> 00:06:44,279
Speaker 1: were talking about in that one. Yeah, oh, this is

122
00:06:44,279 --> 00:06:47,520
Speaker 1: what not to write in your example. That's it anyway, Look,

123
00:06:47,600 --> 00:06:49,360
Speaker 1: thank you very much Linus for the question, Thank you

124
00:06:49,400 --> 00:06:50,440
Speaker 1: Sean for answering it.

125
00:06:50,800 --> 00:06:51,520
Speaker 2: Thank you Michael.

126
00:06:51,800 --> 00:06:53,680
Speaker 1: Now, if you have your own question that you would

127
00:06:53,720 --> 00:06:55,320
Speaker 1: like us to tackle, and you can make it as

128
00:06:55,320 --> 00:06:57,039
Speaker 1: tricky as you want, and you can ask as many

129
00:06:57,080 --> 00:06:59,960
Speaker 1: sub questions as you want as well as Linus did,

130
00:07:00,880 --> 00:07:02,920
Speaker 1: then please send it on through do as lanas did,

131
00:07:02,960 --> 00:07:05,159
Speaker 1: head to fearangreed, dot com, dot a you pop your

132
00:07:05,240 --> 00:07:08,640
Speaker 1: question in there, or go to Facebook or LinkedIn or Instagram,

133
00:07:08,680 --> 00:07:10,440
Speaker 1: any of the social media platforms. Send us through a

134
00:07:10,440 --> 00:07:12,480
Speaker 1: message and we will put it on the list. Thank

135
00:07:12,520 --> 00:07:14,880
Speaker 1: you very much for listening. I'm Michael Thompson and this

136
00:07:15,000 --> 00:07:15,920
Speaker 1: is Ask Fear and Great