Both the price and the settlement date are specified in the contract.
There are two sides to a DAX® futures transaction. A long position represents the buyer's obligation to purchase the DAX portfolio for the agreed price on the settlement date; a short position refers to the seller's obligation to deliver the DAX portfolio. Normally, the DAX shares are not actually delivered; instead, the contract is settled in cash.
Futures on DAX are bought and sold every trading day on the Eurex exchange. The value of a DAX futures contract is equivalent to 25 times the current price of the contract in euros. The settlement date is always the third Friday of the respective contract month (March, June, September and December).
The price of a futures contract depends on supply and demand, with market participants attempting to anticipate the level of the index on the settlement date, taking into account the cost of money. The price of the DAX future is thus quoted higher than DAX. Normally, the further away the settlement date, the greater this difference will be. On the settlement date, the prices of DAX and the DAX future are equivalent.
Investors who trade in DAX futures must maintain a separate account at their bank, called a margin account, in which they deposit collateral to cover their futures positions. For every point that the DAX future moves, 25 will be either debited or credited to the margin account. If the margin in the account is no longer sufficient, the investor must furnish additional funds. Should he fail to do so, the bank has the right to sell the contract immediately.
