| Trading Stock Index Futures and Options
|
What are Stock
Indexes?
Stock Index is an
indicator used to measure and report value changes in a selected group of
stocks. How a particular stock index tracks the market depends on its
composition-the sampling of stocks, the weighing of individual stocks, and
the method of averaging used to establish an index.
Where are the markets for Stock
Indices located?
Below is a list of
the exchanges where major stock index futures and options are traded.
|
City /
Country |
Name of
Exchange |
Stock
Indexes |
| Chicago / USA |
Chicago
Mercantile Exchange (CME) |
S&P 500,
E-Mini S&P, Nasdaq 100, Nikkei 225 |
|
Chicago /
USA |
Chicago Board of
Trade (CBOT) |
Dow Jones Ind.
Average Index |
|
London /
UK |
London
International Financial Futures and Options Exchange
(LIFFE) |
FTSE 100, FTSE
250 |
How do investors make money by
trading in stock indexes?
Investors take
advantage of movements in index numbers in order to gain profits. Below is
a general description of trading outright index futures contacts.
For instance, an
investor thinks that the Dow Jones Industrial Average (DJIA) Index can go
higher due to certain fundamental or
technical reasons , which he/she believes
will result in surging share prices of DJIA component
companies, dragging the index up. He / she then decides to buy one
DJIA futures by placing an order through the brokerage company that he/she
is associated with. Let us assume the September DJIA futures contract was
bought at 10,800 and the index value rose to 10,900 in a few days time.
He/she then decides to sell the futures contract at 10,900. This will
fetch a profit of 100 points which will translate into an amount of
$1000.
At another occasion,
an investor thinks that the DJIA index is headed down. He/she then decides
to sell one DJIA index futures contract. Let us assume the index futures
was sold at 9,900 and the index value dropped to 9,800 in a few days time.
This will fetch a profit of 100 points. In this way, investors can make money
both in a rising and a falling market.
What will happen if index value moves
against existing positions?
Unlike other
conventional investments, financial markets are characterised by a higher
risk element. Investors adopt
various risk management techniques to limit losses as well as to protect
profits. Futures traders also use options contracts to control their
exposure to risk.
We strongly advise all
first-time investors to clearly understand the risks and rewards
associated with futures trading. If you are interested to know about risk
management techniques, you may contact our Research Dept.,
or click here
to have a Representative contact you.
Where can I get stock index price
quotes and market information?
Our clients can
receive real-time price quotes by phone 24 hours a day. Price quotes and
market information are made available on computer terminals at SFB's
office that are obtained from satellite-based quote vendors. In addition,
Internet based real time and daily price quotes are available on this
website for informational purposes.
Will SFB help beginners get
started trading?
Yes we do. Our
experienced brokers and analysts will be by your side every day limiting
your risks and maximising your opportunities. In addition, beginners will
receive training that are arranged as trading workshops. Contact SFB Research for beginners
package.
Also check out various trading options
that we are offering to beginners as well as to experienced
traders. How should I go about opening a
trading account?
Click here to request
account application materials.
Got a question?
It is likely that you will have many questions about investing in
financial markets. You will find answers in the FAQ Section.
Please be
advised that apart from what has been described above, investors use
various other trading strategies combining futures and options which
are appropriate for different market conditions. Click here to go
to Advanced Trading
Strategies |
Also see:
Advanced Trading
Strategies
Internet Based Price
Quotes & Charts
Historic Price
Charts
|
