Stock Index Futures

Overview

A stock index measures the performance of a selected basket of stocks which in turn measures the performance of the whole stock market.  Stock Index Futures allow investors to participate in a basket of stocks and trade on the broader stock market without taking positions into individual stocks.  These products can be used as a hedging tool to protect the investor against stock market fluctuations without changing his actual dollar investment in stocks.

Advantages of trading Stock Index Futures:

• Diversify risks by spreading over a basket of stocks
• Hedge portfolio against price fluctuations
• Flexibility of buying or selling first (shorting)
• Substantial liquidity in terms of large open interest, volume and tight bid/offer spreads
• Online access to global futures exchanges, 24 hours daily throughout the week
• Small investment outlay
• Leverage trading on margin (if losses exceed initial deposits, investor needs to top up additional margin funds at short notice.)