An Introduction to Trading Futures

Tom Sosnoff and Tony Battista answer questions dealing with trading futures contracts. They discuss the benefits of using futures and comparable options stra…

Currently one of the most largely traded markets is the equity futures market. Frequently newer traders as well as some veteran investors don’t realize that there are many stock exchange products within futures. There are numerous forms of equity futures, one being stock futures, EFT futures and another called stock index futures. Equity future contracts are a contract to sell or buy a precise amount of equity (individual), equity index, or perhaps a ‘basket’ of equities at a contract price and settled on a specific date sometime in the ‘future’.

Stock index futures are actually futures markets in which the underlying asset is actually a stock index, for example the Dow Jones, or even the FTSE100. The pricing is based upon the costs of many companies. This particular market is typically settled by way of cash, and not the delivery from the underlying product. These are traded in the same manner as currency and commodity future markets and therefore are measured by the capitalization from the particular company. Recent surveys have validated that using stock index futures pertaining to direct hedging instruments happen to be highly effective and a top strategy to balance risk.

Stock futures are to purchase or sell stock; however, you won’t ever receive or own the particular stock certificate. This contract typically they will never get to the actual expiration date determined inside the contract. They are also traded on the futures exchange. Single stock futures (SSF) are often large corporation stock for example Apple, Microsoft, etc. The trader will even not be entitled to dividends from this method of trading, as the stock is not owned by the futures trading investor.

EFT futures which is short for Exchange Traded Fund, is a security which tracks commodities, baskets of assets or the index. These futures contracts are usually less expensive than mutual funds, and are traded like stocks. Often use this equity future as a strategy to gain exposure to different market sectors. They are flexible and offer an easy entry. EFT futures will vary than that of EFTs, as they do not offer an expiration date.

There are lots of benefits which have to do with the equity futures derivative; they offer the trader tax efficiency, lower commission expenses and also gives transparency. There is also a wide array of trading strategies which offer flexibility and also convenience. One such opportunity which is used by short term traders is following and monitoring volatility levels, these levels often are indicators from the upcoming market movements.

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Originally posted 2014-12-12 18:40:53. Republished by Blog Post Promoter

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