Single-stock futures

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How are Stock Futures different from Stock Options? In stock options, the option buyer has the right and not the obligation, to buy or sell the underlying share. Risk-return profile is symmetric in case of single stock futures whereas in case trading for stock option and future stock options payoff is asymmetric. Also, the price of stock futures is affected mainly by the prices of the underlying stock whereas in case of stock options, volatility of the underlying stock affect the price along with the prices of the underlying stock.

What are Stock Futures? How are Stock Futures priced? What are the opportunities offered trading for stock option and future Stock Futures? How are Stock Futures settled? Can I square up my position? When am I required to pay initial margin to my broker? Do I have to pay mark-to-market margin?

What are the profits and losses in case of a Stock Futures position? What is the market lot for Stock Futures? Why are the market lots different for different stocks? What are the different contract months available for trading?

What is spread trading on BSE? As an investor, how do I start trading in Stock Futures? What securities can I submit to the broker as collateral? How does an investor, who has the underlying stock, use Stock Futures when he anticipates a trading for stock option and future fall in stock price? How can an investor benefit from a predicted rise or predicted fall in the price of a stock?

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In finance, a single-stock future SSF is a type of futures contract between two parties to exchange a specified number of stocks in a company for a price agreed today the futures price or the strike price with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to take delivery of the underlying stock in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to deliver the stock in the future, the "seller" of the contract, is said to be "short".

The terminology reflects the expectations of the parties - the buyer hopes or expects that the stock price is going to increase, while the seller hopes or expects that it will decrease.

When purchased, no transmission of share rights or dividends occurs. Being futures contracts they are traded on margin, thus offering leverage, and they are not subject to the short selling limitations that stocks are subjected to. They are traded in various financial markets, including those of the United States, United Kingdom, Spain, India and others.

South Africa currently hosts the largest single-stock futures market in the world, trading on average , contracts daily. In the United States, they were disallowed from any exchange listing in the s because the Commodity Futures Trading Commission and the U.

Securities and Exchange Commission were unable to decide which would have the regulatory authority over these products. After the Commodity Futures Modernization Act of became law, the two agencies eventually agreed on a jurisdiction-sharing plan and SSF's began trading on November 8, Two new exchanges initially offered security futures products, including single-stock futures, although one of these exchanges has since closed. In , the brokerage firm Interactive Brokers made an equity investment in OneChicago and is now a part-owner of the exchange.

Single stock futures values are priced by the market in accordance with the standard theoretical pricing model for forward and futures contracts, which is:. Note the value of r will be slightly different in the two equations. The value of a futures contract is zero at the moment it is established, but changes thereafter until time T, at which point its value equals S T - F t , i. From Wikipedia, the free encyclopedia. Energy derivative Freight derivative Inflation derivative Property derivative Weather derivative.

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