The main advantages of stock index futures

We have seen the nature of our knowledge of stock index futures. Participants and participation methods, etc. For investors, where is the special attraction of stock index futures? What convenience can this financial instrument bring to investors? We summarized the following main aspects:

First, air burst mechanism

Investors can short the index by selling the index futures. To profit when the stock market falls. Unlike shorting individual stocks, investors simply have to sell a futures contract in the market at the current price. There is no need to borrow or borrow securities from specialized institutions (brokerages or other financial services institutions), and there are no strict restrictions on shorting individual stocks. The trading nature of stock index futures makes it easy for investors to short stocks, providing a low-cost hedge against market declines.

Second, margin trading

Like most financial derivatives, stock index futures are leveraged. Co-manifestation is different from options and warrants: options and warrants achieve leverage through lower absolute prices, while stock index futures achieve leverage through margin trading.

Third, low cost

Stock index futures trading costs themselves are relatively low. In the Hang Seng Index futures market in Hong Kong, for example, traders pay about HK $100 each time they trade a single index futures contract. On December 10, 2009, the price of the Hang Seng Index futures contract 1006 was 21,300 points. The multiplier of the Hang Seng Index futures contract is HK $50 per point, so buying one index futures contract is equivalent to buying shares worth HK $1065,000. At HK $100, the transaction cost is just over 0.9 per 10,000. And the stock trades cost is about 3.6 per 1,000.

4. Arbitrage opportunities

Investing in individual stocks is usually based on studying the fundamentals of individual companies, while trading in stock index futures is usually based on investors’ judgment of the overall market trend. As the factors affecting the market are more and more complex, the assessment of interest is relatively asymmetric. Therefore, investors’ judgment of the future market is more likely to be biased than their judgment of individual stocks, which lays a solid foundation for arbitrage. In addition. In the stock index futures market. Multiple contracts traded in different delivery months are also prone to arbitrage opportunities.

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