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 fell sharply. The Shanghai and Shenzhen markets opened slightly higher but quickly retreated, showing a predominantly downward trend throughout the day. The Shanghai Composite Index fell below 2800 points, closing at 2789.25 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 a certain degree of decline. A total of 22,249 lots were reduced across the three contracts on that 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 three futures contracts declined, the positions of long and short traders showed mixed changes. In IF, both long and short positions increased by over 2,000 lots; longs decreased by 2,760 lots, shorts decreased by 2,503 lots, and net short positions slightly increased 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. For IC, large reductions occurred: 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 desks continued to increase long positions to bottom fish. Guotai Junan Futures increased longs by 1,212 lots, with net long positions rising to 6,227; Galaxy Futures added 278 lots, turning net positions from long to short, with net longs at 17; UBS Futures increased longs by 552 lots, with net longs rising to 1,902. Meanwhile, some desks reduced long positions, such as GF Futures, Yide Futures, and Dongwu Futures, which 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; Haizheng and China Merchants Futures added 102 and 127 shorts, respectively, reaching 1,424 and 613. Conversely, desks like Guofu and Guoxin Futures saw their short positions decrease somewhat.

[Chart: Main long and short positions in IF]

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 futures is expected to slow, and a stabilization or rebound may occur soon.

(Author’s affiliation: Yong’an Futures)