Dow Stock Futures

Most futures contracts with delivery of a commodity like gold, wheat or wood. For years, you can buy contracts on financial products such as Treasuries and euro.

Therefore, SSF are alternative options and, if you believe the price of equity will soon selling.

You can buy a contract (usually 100 shares and 1000 shares for many ETFs) by making only 20% margin. You can sell it at any time before the expiry date (usually the third Friday of the expiry month). If the market price of the stock has increased, you will make money. If it came down, you lose.

If you hold the stock through the expiration date, you accept delivery of the shares at the price of the contract.

If you own the contract, you do not have the rights of shareholders and do not receive dividends.

It is equally easy to sell contracts if you think that a given stock, index or ETF will remain in the market price. Again, you can control the entire contract at 20% down. And you can sell it before the expiration date.

If you hold this position through the expiration date, you must return the shares for the contract price. If you were right and the market price has fallen, you make money. If you were wrong and the market price is higher than the contract price, you lose.

This type of security has been made illegal in the U.S. because in the 1980s, the Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission could not agree on who should regulate them. In 1982, John SR Shad, chairman of the Securities and Exchange Commission (SEC), and Philip Johnson, chairman of the Commodity Futures Trading Commission (CFTC), has decided to ban them.

However, the Commodities Futures Modernization Act of 2000, signed by President Bill Clinton December 31, 2000, allowed them back in the U.S. They began trading Nov. 8, 2002. At first they were inscribed on two different constituencies. But NQLX consolidated its contracts in October 2004. This means that now the United States, they are only listed on OneChicago, a joint venture of the Chicago Board Options Exchange, Chicago Mercantile Exchange and Chicago Board of Trade.

They also trade in the United Kingdom, Spain, India and South Africa.

OneChicago currently contains 1828 single stocks. The index is indeed "narrow basis" - typically nine or fewer stocks, not a well-known index like the S & P 500 or even the Dow Jones Industrial Average. ETFs available include the key such as spiders (S & P 500), Powershares QQQ (NASDAQ) and diamonds (Dow Jones Industrial Average).

Transactions are cleared by the Options Clearing Corporation and Chicago Mercantile Exchange. The trade is through the GLOBEX Mercantile Exchange or the Chicago Board of Options Exchange CBOEdirect.

Four months ago expirations: March, June, September and December. Tick size is $ 1.

Margin requirements are marked on the daily market. So you must be prepared in case of daily fluctuations. If your position goes against you today, you need more money or your broker to sell your contract. You may be right in the long term, but taken in the short term.

However, you must also remember you will pay interest on the money in the margin.

Single stock futures makes sense if you short stocks. They are much easier and convenient access to short-term.

The SSF can also function as a hedge for your portfolio. If you sell a contract, he will value if the market price of your stock decreases.