Single Stock Futures

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Looking for information on Single Stock Futures? You've come to the right place! You'll find a considerable amount of information on single stock futures here.

Beginning around November 2002, one of the most significant events to rock the U.S. Financial Markets in decades has occurred. That is, of course, provided that three branches of Government, 2 regulatory agencies, and a partridge in a pear tree could agree on terms set forth in the Commodity Futures Modernization Act.

Meanwhile, non-US investors and traders were enjoying futures contracts on individual stocks being traded abroad. This derivative product was then available to the U.S. based investor, trader, and speculator.

Since the open of Single Stock Futures contracts to the US citizen we have seen an increase every month in interest to this new trading tool. The number of Single Stock Futures contracts available for trading has grown over a 100 stocks with new contracts added just about every day.

First American Futures, Inc. is actively prepared for the US introduction of Single Stock Futures. While contract specifications, exchanges, and what stocks would be traded were yet to be determined, First American Futures, Inc. was closely watching the nonUS exchanges that were trading these products.

We have collected a number of links to important discussion and documentation regarding the these products.

If you have additional questions on the subject and would like more information, please feel free to call or email us.

What are Single Stock Futures?

Quite simply, Single Stock Futures are futures traded on individual stocks. Futures traded on stock indexes like the Dow, S&P 500, and the NASDAQ have been around for a while. They have since become extremely popular trading vehicles. Single Stock Futures carry stock trading to a whole new level with the tool of futures and options on individual stocks.

Single Stock Futures are available for trading in the United States. An eighteen year ban on Single Stock Futures has been lifted so that this product can be traded in the United States. These contracts are already traded in london on the LIFFE exchange. Single Stock Futures are a leverage based trading vehicle for securities. This Single Stock Futures market is bringing the futures industry in conjunction with the SEC (Securities Exchange Commission), NFA (National Futures Association) and the CFTC (Commodity Futures Trading Commission) to form a large regulatory board for the new Single Stock Futures.

The launch was delayed in part due to the events of September 11. You can learn more about this exciting new market by contacting First American Futures, Inc. for the latest developments. We look forward to having you visit this site for updates on this exciting new market and e-mailing you to provide new information on all regulatory issues.

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? 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? Single Stock Futures trading hours 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.

LIFFE Exchange and Universal Stock Futures

Historical volume information regarding Universal Stock Futures, including Open Interest and ADV's can be found on the LIFFE web site at the following link http://www.liffe.com/liffedata/contracts/index.htm.

Volume and open interest for Universal Stock Futures is also available on the LIFFE web site on a 10 day rolling basis. This information can be located at - http://www.liffe.com/working/statdis2#dis6

Universal Stock Futures traded on the LIFFE Exchange are NOT available to US based investors. Please note the following description of the current regulatory position in respect of US based investors can be found at: http://www.liffe.com/trade/gn-c/circ01/01-11.pdf