VPS | Comprehensive Dictionary of Derivative Securities

With superior advantages such as same-day T0 trading, profit opportunities in both buying and selling directions, and high leverage, derivative securities are increasingly attracting the interest of investors. Join VPS to explore the concepts and knowledge revolving around derivative securities to unlock the door to a prosperous investment journey.

Derivative Securities: Financial instruments in the form of contracts whose value depends on the price of an underlying asset. The derivative securities themselves have no intrinsic value.

Underlying Asset: The subject used as a reference in a derivative contract. The underlying asset can be an index, stock, interest rate, commodity, agricultural product, metal, etc.

Derivative Trading Account / Futures Account: An account within the overall custody account of the Client opened at VPS to execute the Client's derivative securities transactions.

Long: Buying derivative securities

Short: Selling derivative securities

Expiration Month: The month the derivative contract expires and is settled. For VN30 index futures contracts, each contract corresponds to an expiration month. There are four listed contracts with expiration months: the current month, the next month, and the last two months of the nearest quarter.

At the time of January 2024, the Hanoi Stock Exchange listed four derivative securities contracts as follows:

Expiration Date of Derivative Securities: The last trading day of the derivative contract. If investors do not actively close their positions before this date, they will be automatically closed after expiration. The expiration date of derivative securities is the third Thursday of the contract's expiration month.

End-of-Day Settlement Price: The closing price of the derivative contract used to calculate the profit/loss incurred during the day.

Final Settlement Price of Derivative Contract (FSP): The settlement price after the derivative contract's expiration date. The settlement price is calculated as the simple arithmetic average of the VN30 index values ​​in the last 30 minutes of the last trading day (including 15 minutes of continuous matching and 15 minutes of closing matching), after excluding the highest 3 and lowest 3 index values ​​of the continuous matching session.

Futures Margin: the amount of money that investors must deposit before entering into a contract to ensure the performance of obligations as specified in the contract. According to current regulations, the minimum margin at VSD is 17%.

Derivative Securities Position: The status and quantity of an investor's derivative securities.

Opening a Position: Executing a buy (long) or sell (short) order for futures contracts.

Closing a Position: Matching the opposite position to the futures contract that the investor wants to close. For example, if an investor holds 2 long positions, they can close them by opening two short positions corresponding to the two long positions.

Sinh Position Limit: The maximum net position an investor can hold at any given time. Position limits are set to prevent an individual or organization from having many contracts, thereby significantly affecting derivative securities trading. Using position limits helps maintain a stable and fair market, ensuring the rights of investors participating in derivative securities trading.

Open Interest (OI): the number of derivative securities contracts that are in an open position and have not yet been liquidated or settled.

Contract Multiplier: The conversion factor of the value of index futures contracts into currency. The contract multiplier is 100,000 VND.

Contract Size of Derivative Securities: The value of 1 derivative securities contract. For example, if the VN30F1M index has a price of 1000 points, with a multiplier of 100,000 VND, then the contract size of the derivative securities is 100 million VND.

Daily Profit/Loss Settlement: When investors trade and hold positions in derivative securities contracts, they must settle all profits/losses from those positions daily. If a client's derivative securities account incurs a net loss, the investor must pay the entire loss amount by 9:00 AM the following day at the latest. If a client's derivative securities account incurs a net profit, the investor will receive the total profit amount after 11:00 AM the following day.

Short-Selling Futures Contracts: Investors can short sell (profit from market declines) by opening a short (Short) position in futures contracts.

T0 Trading: Investors have the right to open and close positions on the same day to realize profits or cut losses when trading in the derivative market without having to wait until T+2 as in trading in the underlying securities market.

Hedging with Derivatives: Engaging in a short position in derivatives alongside holding the underlying stocks to reduce risk when the market declines. When the market declines, the value of the underlying stocks decreases, but the investor profits from engaging in a short position in derivatives, helping to minimize the risk of the investment portfolio.

Forward Contract: An agreement between two parties to buy/sell an underlying asset at a specified time at a predetermined price at the current time.

Futures Contract: An agreement to buy or sell a specific underlying asset at a predetermined price (future price) of that asset at a future adequate time, and this delivery is made by the regulations of the organized exchange.

Option Contract: A legal agreement in which one party has the right to require execution, and the other party has an obligation to buy or sell a number of underlying assets at a predetermined price in the contract within a certain period or at a particular time.

Swap Contract: A legal agreement in which two parties commit to exchanging the cash flows of one party's financial instrument with the cash flows of the other party's financial instrument for a certain period.