Single
Stock Futures
Frequently Asked Questions
Are
Single Stock Futures better than trading
stocks?
An advantage that single-stock futures have
over trading stocks is that you can sell
without waiting for an uptick. So, when
the stock price is dropping, you might be
able to take a short position in single-stock
futures sooner than if you wait for an uptick
to sell the stock itself.
Are
Single Stock Futures better than trading
equity options?
Single-stock futures are more straightforward
than equity options, where you have to decide
which strike price to trade within each
contract month, a decision that may involve
an analysis of time premium. With futures,
it’s an easy decision: Do you believe
the price of the underlying stock is going
to higher or lower than the current price
indicated by a certain futures contract
when that contract expires? Buy futures
if you think the price will be higher. Sell
futures if you think the price will be lower.
How
big are Single Stock Futures contracts?
Nothing has been determined at this time,
but we believe it is likely that each futures
contract will represent 100 shares of underlying
stock. That is the contract size used at
LIFFE and by the Chicago Board Options Exchange
(CBOE) for equity options.
What
hours will they trade?
Once again, no details are available yet.
But, we look for Single Stock Futures trading
hours to match those of the U.S. stock market,
i.e., 9:30 a.m.-4 p.m., New York time.
What
are the margin requirements for Single Stock
Futures?
The initial margin requirements for Single
Stock Futures will be 20% of the contract
value. If so, margin would be $2,000 for
one contract that represents 100 shares
of a $100 stock (contract value of $10,000).
How
is an Single Stock Futures contract different
from an equity option contract?
When you buy or sell a single-stock futures
contract, you are obligated to fulfill the
terms of the contract upon its expiration
(unless you offset the position before then).
When you buy an equity option contract,
you have the right, but not the obligation,
to either buy or sell 100 shares of the
underlying stock at the option’s strike
price by the time the contract expires.
When you sell an equity option contract,
you are obligated to either buy or sell
100 shares of the underlying stock at the
option’s strike price at contract expiration.
When
will Single Stock Futures be available in
the United States?
Now!
Please
be sure to visit our Single Stock Futures
Resource Center.
|
