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In spite of the disadvantage of trading outside of its natural time zone, the trading activity of Nikkei 225 Index futures at CME Group has shown significant growth in recent years, especially following the introduction of the Japanese yen-denominated contract in 2004 to accompany the original U.S. dollar-denominated version.
The focus of this article is to track the recent performance of the futures contract against the Nikkei 225 Index. Specifically, if a market participant were to use the product to gain exposure to the Japanese stock market, how would he/she fare in terms of coming close to the performance of the underlying stock portfolio represented by the index? The two aforementioned versions of the equity index futures trade at CME Group, denominated in Japanese yen and U.S. dollars, respectively. The natural choice for performance comparison is the Japanese yen-denominated version, which carries a contract multiplier of JPY 500. Because the profit and loss for this contract is calculated in yen, the contract offers an “apple-to-apple” comparison against a stock portfolio as represented in the underlying index. You can find a discussion of the relative performance of the two futures with different currency denominations in a companion article.
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