Swiss Franc Futures Strategy (Backtest And Example)

Last Updated on December 16, 2022

The Swiss Franc (CHF), created by Swiss cantons in 1798, became the official currency of Switzerland and Lichtenstein in 1859 after currency issuance was restricted to the federal government. The Swiss franc futures market is extremely popular among forex traders, being the 6th most actively traded currency. It is well-known for its low volatility and is often considered a safe-haven currency. How do you trade the Swiss Franc futures strategy?

The Swiss franc futures strategy refers to the methodologies and techniques for trading the Swiss franc futures contract. Swiss franc futures are a financial derivative product with the Swiss Franc as the underlying asset. Such products are tradable, but legally binding contracts in which the seller agrees to deliver (and the buyer agrees to receive) a specified amount of Swiss francs at an agreed-upon exchange rate on a future date. You can use them to speculate or hedge against exchange rate risks.

In this post, we answer some questions about the Swiss Franc futures strategy.

What are Swiss Franc futures?

The Swiss franc futures are futures contracts with the Swiss Franc as the underlying asset. They are tradable contracts in which the seller agrees to deliver (and the buyer agrees to receive) a predetermined amount of Swiss francs at a predetermined exchange rate on a future date. The contract trades on the CME Globex platform, and its pricing is based on the expected exchange rate of the Swiss franc to the US dollar in the future.

Like any other futures contract, Swiss franc futures are standardized in terms of size and date of delivery, and they trade on regulated exchanges, unlike the over-the-counter USD/CHF spot forex market. Futures contracts are a leveraged product. As a result, a trader only needs to deposit a fraction of the contract’s total value to trade it, whether it is for speculative purposes, hedging against exchange rate risks, or portfolio diversification.

What is a Swiss Franc futures strategy?

A Swiss Franc futures strategy refers to the trading approach you can use to make money from the futures contract. Your strategy will help you with market timing, use of leverage and position sizing, risk management, and trade management techniques.

You will need a robust trading strategy to succeed in trading the Swiss Franc futures. A good strategy for trading this contract must have precise entry and exit signals.

Swiss Franc futures strategy backtest

A strategy backtest with trading rules and settings is coming shortly.

What is the seasonality of Swiss Franc futures?

In financial trading, seasonality refers to the tendency of a security’s price to move in a fairly predictable way during certain periods of the year. In most cases, the periods we refer to are the various months of the year.

As can be seen from the chart below, the Swiss franc futures tend to perform better against the USD during December as many people sell the USD in preparation for the Christmas holidays. However, the currency performs poorly during January and February as many people buy up the USD following the end of the Christmas holidays.

Swiss franc futures strategy
Source: equityclock.com

What moves the Swiss Franc What affects the Swiss Franc the most?

The major factors affecting the Swiss Franc are economic reports and important political events, such as elections. Some of the economic reports with the most significant effects on the movement of the Swiss Franc include the following:

  • Monetary policy reports, including interest rates and policy statements
  • Inflation-focused reports, such as the consumer price index and the producers’ price index
  • Unemployment rate and wage data
  • Growth reports, such as the GDP, manufacturing PMI, services PMI, and retail sales
  • Reports about the balance of payments, such as current account and trade balance reports
  • Reports on financial market crises

How are Swiss Franc futures traded?

The Swiss franc futures contracts trade on the CME Globex electronic trading platform — Sundays through Fridays, from 5:00 p.m. to 4:00 p.m. CT the next day, with a one-hour break in between. Friday is an exception, as the market closes at 4:00 p.m. and reopens at 5:00 p.m. on Sunday.

One full contract of Swiss franc futures settles for 125,000 Swiss francs. In addition to the full contract, micro contracts settle for 12,500 Swiss francs. The pricing is in US dollars and cents per CHF increment. For both contract types, there are contracts listed for 20 months in the March quarterly cycle for the full contracts (March, June, September, and December). Trading ends at 9:16 a.m. on the second business day (usually Monday) before the third Wednesday of the contract month.

The contract is settled at expiration by physical delivery of the specified amount of Swiss francs, which is usually done on the third Wednesday of the expiring month.

How do you start trading Swiss Franc futures?

The contract is traded through a futures broker, with access to the exchange where the CHF/USD futures contract trades. To begin trading, you must first open an account with a futures broker and fund it.

You can also trade futures contracts CFDs with an online CFD broker like IG. A contract for difference (CFD) exchanges the price difference between the opening and closing of a trade. It allows you to trade price fluctuations without dealing with contract expiry or asset delivery.

What is the Swiss Franc trading at?

As of December 9th, 2022, the Swiss Franc futures were trading at $1.06865 per Swiss Franc. See the chart here on the CME platform chart. The chart was retrieved from TradingView.

Note that the price changes from time to time, so what is quoted here may not be the price it would be trading when you are reading this post. You can click on any of the links to get the real-time price on the CME platform chart or directly from TradingView.

What’s the Swiss Franc futures hour?

The Swiss Franc futures trades on the CME Globex electronic platform from Sundays to Fridays from 6:00 p.m. – 5:00 p.m. (5:00 p.m. – 4:00 p.m. CT) with a 60-minute break each day beginning at 5:00 p.m. (4:00 p.m. CT). For CME ClearPort, the schedule is Sunday 5:00 p.m. – Friday 5:45 p.m. CT with no reporting Monday – Thursday from 5:45 p.m. – 6:00 p.m. CT.

Where can I find trading charts?

You can find the trading chart on any trading platform you use if it offers charting services. If your platform does offer charts, you can subscribe to trading charts via a third-party platform, such as MultiCharts.

A more common option is TradingView, which offers free access to charts of different instruments. However, you must subscribe to the Pro services to connect to your broker.

You can also access the chart of the Swiss franc futures via the CME platform.

What are the trading symbols for Swiss Franc futures?

The CME’s Globex platform has two contract specifications for the Swiss franc futures: the full contract and the micro contract. The trading symbol for the full contract is 6S, while the symbol for the micro contract is MSF. The CME ClearPort and Clearing code are E1 and MSF for the full and micro contracts respectively.

What is the specification for the Swiss Franc futures contract?

One contract is equivalent to 125,000 Swiss Francs for the full Swiss franc futures contract. The price quotation is in US dollars and cents per increment. The minimum fluctuation on the CME Globex is 0.00005 per CHF increment, which translates to a tick size of $6.25 per contract. For CME ClearPort, the minimum fluctuation is 0.00001 per CHF increment, equivalent to a tick size of $1.25 per contract.

Twenty-month contracts are listed with quarterly cycles (Mar, Jun, Sep, Dec). Settlement is by delivery method, and trading terminates at 9:16 a.m. CT, two business days (usually Monday) before the third Wednesday of the contract month.

Why should you start trading Swiss Franc futures?

Here are different reasons for trading Swiss franc futures. The major ones include the following:

  • Preserving wealth: The Swiss Franc is considered a safe-haven currency, so investors tend to buy it during periods of global financial market crisis.
  • Speculation: Most of the traders in the currency futures market are there for speculative reasons, and the Swiss franc futures offers a great opportunity for speculation.
  • Arbitrage trading: Currency arbitrage traders can simultaneously buy and sell the Swiss franc futures contract on different platforms to benefit from any price imbalance.
  • Hedging: Investors, fund managers, and business people, who are exposed to Swiss franc exchange rate risks, may see the Swiss franc futures as a risk management tool.

What is the contract size?

For the full or standard contract size of the Swiss Franc futures, one contract is equivalent to 125,000 Swiss Francs. The dollar value is obtained by multiplying it by the dollar exchange rate. For example, with the CHF/USD exchange rate at $1.06865, the USD value of one full contract of the Swiss Franc future would be 125,000 x $1.06865 = $133,581.25.

What is the tick size?

For one full contract of the Swiss Franc futures, the tick size is $6.25 per tick on CME Globex and $1.25 on the CME ClearPort platform.

What is the minimum price fluctuation for Swiss Franc futures?

The Globex platform’s minimum fluctuation is 0.00005 per CHF increment (equivalent to $6.25 per contract tick size). The calendar spread is 0.00005 per CHF increment = $6.25 per contract.

On CME ClearPort, the minimum fluctuation is 0.00001 per CHF increment, which is equivalent to $1.25 per full contract size.

Are there any ETFs?

Yes, a Swiss Franc ETF trades on the US stock exchange — Invesco CurrencyShares Swiss Franc Trust (FXF). The fund offers exposure to the Swiss Franc relative to the US dollar, as it increases in value when the CHF strengthens and declines when the USD appreciates. You can use the ETF to hedge exchange rate exposure or bet against the US dollar.

What factors affect Swiss Franc prices?

The factors that affect the Swiss Franc prices include the following:

  • Monetary policy reports, including interest rates and policy statements
  • Inflation-focused reports, such as the consumer price index and the producers’ price index
  • Unemployment rate and wage data
  • Growth reports, such as the GDP, manufacturing PMI, services PMI, and retail sales
  • Reports about the balance of payments, such as current account and trade balance reports
  • Reports on financial market crises

What is the all-time high for Swiss Franc futures?

According to data from TradingView, the highest the Swiss Franc futures has ever reached is $1.41670, which it achieved in August 2011.

What are the biggest risks in trading Swiss Franc futures?

The biggest risks in Swiss Franc futures trading come from the adverse movement of prices. Given that it is a leveraged instrument, the losses are calculated based on the actual worth of the contract size traded, rather than the amount you deposited. So, if you are trading with a $133,600 worth of contract with a $13,360 account (10x leverage), a 1% negative movement would lead to a 10% loss in your account, and a 10% adverse movement would wipe out your account.

What is the settlement method?

The settlement method is deliverable.

What is the settlement procedure?

On the CME futures exchange, the Swiss Franc futures contract is settled through physical delivery of the currency. The final settlement price of the expiring contract for CHF/USD futures (6S) is determined on the last day of trading at 9:16 a.m. Central Time (CT).

What is the block minimum for Swiss Franc futures?

100 contracts.

What is the difference between Swiss Franc futures and Forex for the Swiss currency?

One of the differences between Swiss franc futures and the Forex instrument for the Swiss currency is that the Forex pair is USD/CHF, which is the inverse of the Swiss franc futures.

Which forex pair is the same as Swiss Franc futures

USD/CHF

What are some important dates for this market?

The important dates include:

  • 1798 when the Swiss Franc was created
  • 2003 to 2006, when the Swiss Franc was marked to the euro (EUR)
  • 2015 when the Swiss National Bank allowed the currency to float

What is the highest Swiss Franc has ever been — its all-time high?

According to the TradingView chart for Swiss Franc futures, the highest level the Swiss Franc ever reached against the dollar was $1.41670, which happened in August 2011.

What is the lowest Swiss Franc has ever been — its all-time low?

According to the TradingView chart for Swiss Franc futures, the lowest level the Swiss Franc ever dropped against the dollar was 0.54920, which happened in July 2001.

Conclusion

Trading Swiss Franc futures can be profitable for various reasons, including speculation or hedging against exchange rate risks. However, the right Swiss Franc futures strategy is required. This guide, Swiss Franc strategy futures Strategy, should have introduced you to the basics of trading Swiss Franc futures.

Similar Posts