Stock Index Futures
By jai of Adsenselover.com
There are around 70 stock index futures contracts that get traded in the different
stock exchanges around the world. Everyday something amazing happens to the stock index at
almost the same time and if you know the secret you can become rich by just trading stock index
futures for only 15 minutes daily when the market opens.
Stock index futures are the most fascinating financial innovation in the last five decades.
Today many people make a living by day trading stock index futures. The most popular among the
stock index futures is the S&P E-Mini Futures which is traded electronically.
Futures trading has been around for hundreds of years and it originally started from the
farmers need to guarantee a fixed price for their future crops. Hence the name futures. Soon
futures markets developed where buyers and sellers in these agricultural commodities could meet
and make a contract that was based on the delivery of the crop on a future date known as the
settlement date at a specified price.
However, Stock Index Futures have only been around for the last three decades. The famous S&P
Futures contract was introduced in 1981. Within a few years more dollars were being traded by
volume in these futures contracts as compared to the total volume of stock investment in the New
York Stock Exchange.
Now many investor make a fortune just by trading stocks and never try to trade these futures
contracts. You really don't need to trade these contracts because trading these futures
contracts is totally different as compared to investing in stocks. However, if you want to
comprehend the short run stock market movements than you will need to learn how these contracts
are traded.
The stock market crash of October 1987 was precipitated by these futures contract due to
something known as portfolio insurance. In portfolio insurance, you try to hedge against stock
price fall by buying futures contracts. Today we can say that we are living in an era of one
market where stocks and futures contracts are interlinked. As said before many people now make
a successful living by day trading the S&P futures.
Now S&P futures value is determined by multiplying the S&P 500 Index points with 250. Suppose
that the S&P Index is at 1300 points. This means that the value of the S&P futures contract
will be $325,000. If the S&P Index moves to 1350 points, you make 50 points or $12,500 and in
case the value of S&P Index declines to 1250 points, you lose 50 points or $12,500. So be
careful when you trade the stock index futures.
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