The FKLI futures is one of Malaysia's most traded futures products. It is derived from the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI), representing the performance of the 30 largest companies on the Bursa Malaysia Main Market.
In previous posts, I've covered some key posts on FKLI, as shown below:
In this post, let's take a step deeper and explore seasonal trends in the calendar spread of FKLI futures!
Related articles on Spread Trading:
What influences the spread of FKLI futures?
We've had many discussions on seasonality in spread trading in this blog. For instance, we talked about how Natural Gas' spread is often influenced by the weather/season.
Meanwhile, FKLI is considered an equity index. As such, factors like weather are not a huge influence on FKLI's spread.
Instead, factors like dividends play an important role in the spread movement of indices futures like FKLI.
Let's find out the seasonal dynamics in FKLI spread.
Seasonal trend in FKLI futures spread
For FKLI, months like March tend to be the time of the year when most companies will announce their dividends.
As such, dividends are usually factored in for the FKLI March contract's pricing. This also means the value of FKLI March contract tends to be lower than FKLI February's contract:
This phenomenon leads to a seasonally bullish month in February for the Feb:Mar FKLI spread contract. In the chart below, spot how the price difference between the FKLI Feb:Mar spread contract widens with time in February:
Showing the same Feb:Mar FKLI in its spread chart should give you a more obvious picture of the bullish seasonal pattern:
Consistent Past Pattern
FKLI Feb:Mar 2023 Calendar Spread in February 2023
FKLI Feb:Mar 2022 Calendar Spread in February 2022
Verdict: Understanding the fundamentals of what influences spread movement in FKLI futures
Unlike energy or grain futures that are influenced heavily by weather, dividends tend to be a more common factor that influences the spread movement in equity futures like FKLI.
Hopefully, this gives you a direction or idea on how to trade spread when it comes to FKLI futures!
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Disclaimers
Any of the information above is produced with my own best effort and research.
This post is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions.
Leverage is a financial tool that comes with its advantages and risks. Please learn and understand both the upsides and downsides of leverage before using it for trading.
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