Understanding Single Stock Futures
Of the numerous financial endeavors that a forex trader or businessman can invest in, one of the most attractive, profits wise, are Single Stock Futures, or SSF. What makes SSF more appealing is that it is very cost effective and the process is straightforward.
For an investor with experience in forex trading or futures contracts, he will have little difficulty understanding Single Stock Futures. Basically, SSF allows forex traders to utilize stocks the same way he uses commodities in futures market trading. Because the concept of SSF is similar to futures, the transactions are virtually the same.
There are several advantages and benefits from using Single Stock Futures compared with ordinary stocks. All too often, a stock needs to be sold when the market is in a downtrend, and the difficulties that come with it include the price falling below what you desire. There is also the need to pay fees to the broker.
SSF, however, gives the forex trader the option to buy or sell the stock at any point during the prescribed futures contract period. There is no broker fee to worry about. For an investor, he can go short on an SSF as he would any futures contract. By utilizing this against his shares, the investor has for himself a hedge against adverse market movements.
By analyzing the relationship of one set of stocks to another, a forex trader can, as in futures trading, buy or sell SSF contracts depending on the market situation. Thus, one can profit regardless of the movement of the financial markets.
Of course, other ways of profiting is very possible, because the fluctuations of the SSF price can be likened to forex currency speculation. The same rules and strategies used there could also be applied in SSF.
Another example of the cost effectiveness of Single Stock Futures is that they have lower margins. Obtaining shares of stock requires a 50% margin, whereas in SSF contracts it is only 20%. There is also no interest charge.
A forex trader can also avail of Narrow Based Indices. Somewhat similar to a commodity index, the advantage here is that an investor can go long or short on certain stock groups without having to worry about the financial demands of purchasing individual shares.
Single Stock Futures provide the trader and investor with more opportunities to make money. By applying well tested strategies in futures trading on stocks, a trader can place himself in a very profitable position.
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