Why do VN30 stocks impact the derivatives market?
The VN30 index represents 80% of total market capitalization and 60% of total market trading value. Therefore, price fluctuations of VN30 stocks will directly affect the price of futures contracts. So why does VN30 stock impact the derivatives market ?
Basic information about the VN30 index
Why does VN30 stock impact the derivatives market?
VN30 represents 30 stocks listed on HOSE, with the highest market capitalization and liquidity, along with many other technical factors.
The value of these 30 stocks accounts for 80% of the total capitalization value and 60% of the total market transaction value. In addition, VN30 is also calculated based on the adjusted ratio of currently freely circulating shares, and has a limit on the maximum capitalization size (10%) of each stock in the basket.
Why does VN30 stock impact the derivatives market?
Why do VN30 stocks impact the derivatives market?
Currently, Vietnam’s derivatives market offers two basic product lines: VN30 index futures contracts and government bond futures contracts. Among them, VN30 index futures contracts are more popular, because this index has less risk of being influenced.
First: VN30 is an index basket representing the 30 stocks with the largest liquidity and capitalization on the Vietnamese stock market.
Investors often use VN30 to evaluate the general trend of the market. Therefore, fluctuations in the VN30 will strongly affect investor psychology, leading to changes in trading behavior in the derivatives market.
Second: The most popular derivative products in Vietnam today are futures contracts and options based on the VN30 index.
The value of these contracts is determined based on the value of VN30. Therefore, when VN30 increases or decreases, the value of derivative contracts will also increase or decrease.
Third: Investors use the derivatives market to hedge risks or speculate on fluctuations in the VN30.
For example, investors can buy VN30 futures contracts to protect their portfolios from downside risk. Or investors can buy VN30 options contracts to bet that VN30 will increase in price in the future.
In addition, there are a number of other factors that can affect this relationship such as:
- Trading mechanism in the derivatives market: Margin regulations, price volatility, etc. can also affect this relationship.
- Investor psychology: Investor psychology plays an important role in determining their trading behavior in both markets.
