How are expiration dates managed?.

All futures contracts have expirations dates. There are three basic approaches for managing the expiration of futures contracts:-

• Offset your position
• Wait until the contract expires, then make or take delivery
• Roll the position over from one contract month into the next.

All futures contracts have expirations dates. There are three basic approaches for managing the expiration of futures contracts:

• Offset your position

Prior to expiration, you may offset by covering (buying back) a short position or selling a long position. You do not have to wait until the expiration date to complete your trade.

Example: A trader takes a long position of 2 contracts of XYZ company (equal to 200 shares) that expire in December. To offset the position, the trader would subsequently sell 2 contracts of XYZ with the same expiration month. The trader could just as easily have taken an initial short position by selling 2 December XYZ contracts and then offsetting this position by buying 2 contracts of December XYZ.

• Wait until the contract expires, then make or take delivery

On the expiration date, holders of short positions of stock futures are required to deliver physical shares of the underlying stock, and holders of long positions take delivery of the underlying stock.

This means that buying a single stock future and holding it until expiration guarentees your ownership of the underlying stock after the expiration date. If you offset your position, this process does not apply. Consult your broker regarding its procedures and fees associated with delivery if you are considering holding a stock until expiration.

• Roll the position over from one contract month into the next

If you hold a long position in a given expiration month, you can simultaneously sell that expiration month and buy the next expiration month for an agreed-upon price differential. Thus, the position is transferred, or rolled forward, and can be held for a longer period..

What are the advantages of narrow-based indices?.

Investors can take a long or short position in a concentrated basket of stocks without incurring multiple transaction fees. Many difficult-to-execute or advanced investing strategies such as spread trading or sector rotation can be executed quickly and cost-efficiently, as narrow-based indices are also subject to a margin requirement of 20% of the cash value of the contract..

What are narrow-based indices?.

Narrow-based indices are small groups of stocks that allow an investor to take a position in a concentrated are of the equities market such as airlines, computers or semiconductor components. Each narrow-based index generally includes about five companies..,

What are the advantages of single stock futures?.

There are three significant advantages:.

• With margin requirements of 20%, single stock futures provide a highly capital efficient way to participate in equities.
• No uptick is required to establish a short position.
• Market participants initiating a short position should benefit from eliminating the costs and inefficiencies associated with the stock loan process.

Trading futures involves the risk of loss. This includes the possibility of loss greater than your initial investment. Stock futures may not be suitable for all investors. Consult your broker or financial advisor before trading..

How does the futures price track with the price of the underlying security?.

Single stock futures values are priced by the market in accordance with a theoretical pricing model based on a formula:

Most of the time, single stock futures will trade at a premium to the stock price adjusted for the broker loan rate. The premium reflects the interest earned on the capital saved by not posting the full value of the underlying stock. Since futures holders are not entitled to collect dividends, the futures price must be adjusted downward by the expected amout of dividend payments prior to expiration. In the case where a large dividend payment is expected, the futures contract may theoretically trade at a discount to the actual cash price.

A stock futures contract may not always trade at the theoretically correct price due to a number of other market factors, such as whether the underlying stock is difficult to borrow for covering short trades..

What are single stock futures?.

Single stock futures are futures contracts on individual stocks. There are currently over 80 well-known stock futures such as IBM, eBay, and Philip Morris. These futures products provide investors with a cost-effective vehicle for participating in U.S. equities markets.'

Single Stock Futures offer investors a cheaper way of investing in the equity markets and should, therefore, have considerable appeal. They represent one the most interesting developments in the field of financial derivatives. This is both because of their trading potential, which is very large, and the fact that they have only recently became legal in the US.'

With SSF, investors are now able to trade futures contracts on some of the most popular individual stocks traded on stock exchanges in the US, or on “baskets” of stocks in selected sectors. SSF include approximately 50-70 of the most popular and actively traded stocks in the U.S., such as Microsoft, Pfizer, General Electric, IBM, Citigroup, AOL Time Warner, and Johnson & Johnson, to name a few. In addition, investors can also trade Narrow Based Indices (“NBI”). NBI are small groups of stocks in a concentrated area of the equities market, such as airlines, pharmaceuticals, semiconductors, energy and automotive.'

Finotec Commodities Platform

The multi-product Finotec Trading Platform, allows you to trade a wide range of financial instruments including commodities, forex, options, stocks, CFDs and futures. Each product however comes with its own resources and tool kit. Therefore, when trading commodities, you have direct access to all the news, the graphs, trading tools and indicators you may need to inform the position you intend to take. The platform gives you access to the world’s largest commodity markets at competitive prices.'