Here is an explanation of Single Stock Futures:
Over the years, the stock market has afforded opportunities for investors to share in the growth of the U.S. economy. Additionally, new exchange-traded financial instruments like stock options and stock index options and futures have been created to help manage the risks of stock ownership and to take advantage of stock market moves. Now changes in federal regulations have paved the way for the introduction of security futures (SSFs). This new instrument provides a link between two kinds of financial markets‹securities and futures‹and makes it easier to hedge portfolios and capture market opportunities. This revolutionary new product marks a quantum leap in the range of investment opportunities available to both institutional and retail investors. Single stock futures make equity trading available to a wider audience therefore, delivering greater efficiencies and liquidity to the underlying market. A SSF contract is simply a standardized agreement between two parties to buy or sell 100 shares of a particular stock or exchange traded fund (ETF) in the future at a price determined today. Futures contracts are bought and sold on federally regulated exchanges, and for SSFs, regulation is by both the Securities and Exchange Commission and the Commodity Futures Trading Commission. SSFs also require reduced capital upfront compared to trading on the traditional cash market as the trader is only required to pay margin. Therefore, capital investment only amounts to margin payable which frees up capital for other investments. SSFs allow traders to profit no matter what direction the market moves. If a trader is bearish on the market, the trader can sell a contract, then make a profit by buying that contract back later when the price decreases. This may decrease the need and costs associated with stock borrowing. SSFs also allow investors to switch exposure from one stock to another without disturbing the underlying stock holding. On NQLX, SSF contracts are generally available with expirations for the first five calendar quarters (expiring in March, June, September and December) and in the first two non-quarter calendar months. For example, on July 1st, SSFs would be offered that expire in July, August, September, and December of the current year, and in March, June and September of the next year. By taking a position in a SSF, you can lock in a price today at which you’ll buy and sell stocks as much as 15 months from now. The minimum price fluctuation, or “tick” size, of NQLX SSFs is one cent per share, or $1 per contract.
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