Even on days when the Japanese stock market is closed, you may see phrases in the news such as:
“Nikkei 225 futures rose significantly”
“Futures fell in night trading”
You may see these phrases.
Why do prices move even when the stock market is closed?
The keyword to understand the reason is futures trading.
In this article, using Nikkei 225 futures as an example, we will organize the differences from cash stocks, the mechanism of trading, and how you can utilize them as an investor.
1. What is futures trading in the first place?
Futures trading is a transaction where you promise to buy or sell at a predetermined price at a specified time in the future.
It is a mechanism that was originally used to prepare for price fluctuation risks of agricultural products and the like.
For example, if you are concerned about large changes in future prices, you can reduce risk by deciding the transaction price in advance.
Today, various things such as stock indices, interest rates, and commodities are subject to futures trading.
Nikkei 225 futures are frequently encountered in stock investment.
2. What are Nikkei 225 futures?
Nikkei 225 futures are futures contracts based on the Nikkei Stock Average.
The Nikkei Stock Average is a stock index calculated using 225 stocks listed on the Tokyo Stock Exchange Prime Market.
On the other hand, Nikkei 225 futures are financial products traded based on that index.
In other words, while the Nikkei Stock Average and Nikkei 225 futures are closely related, they are not the same thing.
The Nikkei Stock Average is calculated from the actual stock prices of its constituent stocks.
Nikkei 225 futures are traded by market participants considering future market outlooks and interest rates, so price differences from the cash index may occur.
3. What is the difference between cash stocks and futures trading?
For example, suppose you purchase 100 shares of Toyota Motor Corporation.
In regular cash stock trading, you pay the purchase price and hold the shares.
Once you become a shareholder, you can receive dividends or shareholder benefits depending on the conditions.
On the other hand, purchasing Nikkei 225 futures does not mean you hold the stocks of the 225 companies included in the Nikkei Stock Average.
Therefore, simply purchasing futures does not entitle you to receive shareholder benefits or dividends from those companies.
Also, in futures trading, you deposit funds called margin to conduct transactions.
Margin is like collateral required for trading.
Because you can conduct large transactions with smaller funds than the actual transaction amount, capital efficiency is high, but there is also the possibility of larger losses.
4. Let’s calculate the profit and loss of futures trading
Here, we will consider the Nikkei 225 mini as an example.
The trading unit of the Nikkei 225 mini is the Nikkei Stock Average value multiplied by 100 yen.
Suppose the Nikkei 225 futures are at 70,000 yen, and you buy one Nikkei 225 mini contract.
In this case, the amount equivalent to the transaction value is
70,000 yen × 100 yen = 7 million yen
This is the amount.
After that, if the futures price rises to 70,500 yen,
(70,500 yen – 70,000 yen) × 100 yen
= 50,000 yen profit
This is the result.
Conversely, if it falls to 69,500 yen,
(69,500 yen – 70,000 yen) x 100 yen
= a loss of 50,000 yen
.
*This is a calculation example that does not consider commissions, etc.
What is important here is that you are not paying the full 7 million yen in cash to trade.
The required margin changes depending on market conditions and other factors.
If there is a large price movement, there is a possibility that a loss exceeding the deposited margin may occur.
Therefore, more careful fund management is required than with cash stocks.
5. Futures allow you to aim for profits even when stock prices fall
In normal cash stock trading, it is common to earn capital gains by having stock prices rise.
On the other hand, in futures trading, you can also start with a “sell” transaction.
For example, if you sell Nikkei 225 mini at 70,000 yen and then buy it back when it reaches 69,500 yen, you will make a profit corresponding to the price difference.
Conversely, if the price rises, a loss will occur.
This mechanism is used not only to aim for profits by predicting that stock prices will fall, but also as a risk management tool for investors who hold cash stocks.
For example, investors who hold a large number of Japanese stocks may sell futures in preparation for a decline in the market as a whole.
This is called a hedge transaction.
However, since the price movements of held stocks and futures do not match, it is not possible to completely prevent losses.
6. Why can you trade at night and on holidays?
Trading hours for Japanese cash stocks are fixed.
On the other hand, the futures market has both daytime and nighttime trading sessions.
Additionally, the Osaka Exchange conducts trading for certain futures and options products on designated public holidays.
Sports Day on October 12, 2026, is also a day subject to holiday trading.
This is a mechanism designed to provide opportunities to respond to movements in overseas markets and other factors.
For example, even if U.S. stocks fall significantly while the Japanese cash market is closed, prices in the futures market may move in response to that impact.
Therefore, it is used as a reference to gauge the direction of the market before the cash stock market opens on the next business day.
7. If futures rise, will the Nikkei Average also rise the next day?
Caution is required here.
When futures prices are rising, one might be tempted to think that stock prices will also rise on the next business day.
However, this is not always the case.
There is a price difference between futures prices and the cash Nikkei Average due to factors such as interest rates, dividends, remaining time to maturity, and supply and demand.
Furthermore, once the cash market actually opens, prices change based on news about individual companies, exchange rates, and trends in overseas markets.
Even if futures have risen significantly, cash stocks may be sold after trading begins.
Futures do not determine future stock prices; they are prices that reflect the judgment of market participants at the time of trading.
8. Is it useful even for those who do not trade futures?
For investors who do not trade futures themselves, there is still value in checking the prices.
For example, this applies if you hold Japanese stocks long-term for the purpose of shareholder benefits or dividends.
Suppose a major event occurs overseas that night.
The cash stock market has already closed, but prices may still be moving in the futures market.
Checking the futures price in that situation provides material to consider what kind of impact it might have on the market the next business day.
However, you should avoid making trading decisions based solely on the price movements of futures.
This is because for long-term investments, factors such as corporate performance and dividend policies are also important.
9. Are futures and margin trading the same?
Although they may look similar, futures trading and margin trading are different.
Margin trading is a mechanism for buying and selling individual stocks by borrowing funds or stocks from a securities company.
On the other hand, Nikkei 225 futures are trades based on stock price indices.
While both may use margin, they differ in terms of trading targets, expiration dates, and settlement methods.
Also, futures have a trading expiration date called a contract month.
Unlike cash stocks, you cannot continue to hold the same contract indefinitely.
Summary | Futures are a clue to understanding market movements
Futures trading is a financial product that involves buying and selling based on future prices.
Nikkei 225 futures are based on the Nikkei Stock Average and can be traded at night and on designated holidays.
Therefore, even while the cash stock market is closed, views on the stock market can be reflected in prices.
On the other hand, the mechanism of using margin carries significant risk, and it is not something for beginners to trade lightly.
Even if you do not actually engage in futures trading, it is meaningful to understand how it works.
This is because when you see the following phrases in daily stock news,
“Futures are rising”
“Futures are falling”
you will be able to understand what is moving.
It is a mechanism worth remembering as knowledge to view the stock market from a slightly broader perspective.
Reference Materials
Japan Exchange Group | Nikkei 225 Futures
https://www.jpx.co.jp/derivatives/products/domestic/225futures/index.html
Japan Exchange Group | Nikkei 225 mini
https://www.jpx.co.jp/derivatives/products/domestic/225mini/index.html
Japan Exchange Group | Holiday Trading
https://www.jpx.co.jp/derivatives/rules/holidaytrading/index.html
Nikkei Inc. | Nikkei Stock Average Profile
https://indexes.nikkei.co.jp/nkave/
#StockLearning #StockInvestmentBeginner #FuturesTrading #Nikkei225Futures #NikkeiAverage #CashStocks #StockInvestment #RabbitStockDiary
