Futures positions have significantly decreased

Although the Federal Reserve cut interest rates by 100 basis points and restarted quantitative easing overnight, global stock markets did not get a boost on Monday and instead declined sharply. The Shanghai and Shenzhen markets opened slightly higher but quickly fell back, showing a predominantly downward trend throughout the day. The Shanghai Composite Index fell below 2,800 points, closing at 2,789.25 points. All three futures contracts declined across the board, with main contracts for IF, IH, and IC dropping 4.6%, 4.02%, and 5%, respectively.

Regarding the basis, due to worsening market expectations, futures discounts widened. By the close, the main contracts for IF, IH, and IC were discounted by 35.8, 25.4, and 51.3 points, respectively.

In terms of trading volume, this week is the delivery week, and futures positions saw some decline. A total of 22,249 lots were reduced across the three contracts on the day, bringing total open interest down to 429,196 lots. Positions in each futures contract decreased to varying degrees: IF reduced by 5,552 lots to 155,417; IH reduced by 5,356 lots to 74,363; and IC reduced by 11,521 lots to less than 200,000.

Regarding main positions, although open interest in all futures contracts declined, the positions of the major long and short traders varied. Both long and short positions in IF increased by over 2,000 lots, with longs decreasing by 2,760 lots and shorts decreasing by 2,503 lots, resulting in a slight increase in net short positions to 8,509. In contrast, IH saw an increase in both long and short positions: longs up by 2,204 lots, shorts up by 2,680 lots, and net short positions increased to 4,432. IC experienced a significant reduction: longs decreased by 5,713 lots, shorts by 7,246 lots, and net short positions fell to 12,119.

In terms of specific trading desks, despite the sharp market decline on Monday, some long positions continued to increase as traders bought the dip. Guotai Junan Futures increased long positions by 1,212 lots, with net long positions rising to 6,227; Galaxy Futures added 278 lots, turning from net long to net short with 17 lots; UBS Futures increased longs by 552 lots, with net long positions rising to 1,902. Meanwhile, some desks saw long positions decrease, such as GF Futures, Yide Futures, and Dongwu Futures, which all saw declines in their long holdings. On the short side, CITIC Futures continued to add shorts, increasing by 1,145 lots to a net short position of 3,141; Hainan Securities and China Merchants Futures added 102 and 127 shorts, respectively, to 1,424 and 613 lots. At the same time, desks like Guofu and Guoxin Futures saw their short positions decrease somewhat.

[Image: IF long and short major positions]

Overall, futures open interest decreased significantly during the week, as increased market volatility prompted some funds to close positions and exit. In the short term, after a sharp adjustment on Monday, the downward momentum of the futures is expected to slow, and a stabilization or bottoming out may occur soon.

(Author: Yong’an Futures)