stock index

Index futures refer to futures contracts that use an index as the underlying asset, such as stock index futures. The Commercial Press "English-Chinese Securities Investment Dictionary" explains: index futures index futures; stock index futures. Also: stock index futures. name. Use plural. A futures contract that uses an index in the securities market, such as the S&P index and the Hang Seng index, as the exercise variety. During the transaction, both parties to the contract agree to bear the ups and downs caused by the fluctuation of the stock price, convert the stock index into cash units by points, and multiply the transaction unit by the stock price index to calculate the standard value of the contract. The biggest feature of stock index futures is that they have the features of both futures and stocks.

Stock Index Futures

Stock index futures refer to financial futures contracts with stock price indices as the subject matter. In specific transactions, the value of a stock index futures contract is calculated by multiplying the index points by a predetermined unit amount. For example, the Standard & Poor's index stipulates that each point represents 500 US dollars, and the Hong Kong Hang Seng Index is 50 Hong Kong dollars per point. The trading of stock index contracts generally takes March, June, September, and December as the cycle months, and there are also transactions conducted in every month of the year. Usually, the settlement is based on the closing index on the last trading day.

The essence of stock index futures trading is the process that investors transfer their expected risk of the entire stock market price index to the futures market. It belongs to futures trading like stock futures trading, except that the object of stock index futures trading is stock index, which is based on the change of stock index and settled in cash. There is no real stock on both sides of the transaction, and only stock index futures contracts are traded. , and you can buy and sell at any time. Foreign exchange trading platforms such as HeHan Global Limited forex can conduct futures investment.

Features of stock index futures

  • (1) Intertemporality. Stock index futures are contracts in which both parties agree to trade according to certain conditions at a certain time in the future by predicting the changing trend of the stock index. Therefore, the trading of stock index futures is based on future expectations, and the accuracy of the expectations directly determines the profit and loss of investors.

  • (2) Leverage. Stock index futures trading does not need to pay the full contract value of funds, only a certain percentage of the margin can be signed to enter a larger value contract. For example, assuming that the margin for stock index futures trading is 10%, investors only need to pay 10% of the contract value to trade. In this way, investors can control 10 times the contracted assets of the amount invested. Of course, while the gains may be multiplied, the losses that investors may bear are also multiplied.

  • (3) Linkage. The price of stock index futures is closely related to the movement of its underlying asset, the stock index. The stock index is the underlying asset of stock index futures and has a great influence on the price changes of stock index futures. At the same time, stock index futures are expectations for future prices, so they also have a certain guiding effect on stock indexes.

  • (4) High risk and risk diversity. The leverage of stock index futures determines that it has a higher risk than the stock market. In addition, stock index futures also have specific market risks, operational risks, cash flow risks and so on.

Scroll Top