360 PA R T I V The Management of Financial Institutions FINANCIAL NEWS Stock Index Futures The prices for stock index futures contracts are published daily In the Wall Street Journal, these prices are found in the Futures column An excerpt is reproduced here S&P 500 Index (CME)-$250 * Index March Open High Low Settle Change Open Interest 840.10 848.00 813.00 839.30 ,0.50 509 850 Information for each contract is given in columns, as follows (The March contract is used as an example.) Open: Opening price; each point corresponds to $250 times the index 840.10; that is, 840.10 * $250 + $210 025 per contract High: Highest traded price that day 848.00, or $212 000 per contract Low: Lowest traded price that day 813.00, or $203 250 per contract Settle: Settlement price, the closing price that day 839.30, or $209 825 per contract Change: Change in the settlement price from the previous trading day 0.50 points, or $125 per contract Open Interest: Number of contracts outstanding 509 850, or a total value of $107 billion ($509 850 * $209 825) Source: Wall Street Journal, January 16, 2009, p C5 at the end of March By buying the contract at a price of 1000, the buyer has agreed to pay $250 000 for the delivery amount due of $250 times the S&P 500 Index at the expiration date at the end of March If the stock market falls so that the S&P 500 Index declines to 900 on the expiration date, the buyer of the contract will have lost $25 000 because he or she has agreed to pay $250 000 for the contract but has a delivery amount due of $225 000 (900 * $250) But you, the seller of the contract, will have a profit of $25 000 because you agreed to receive a $250 000 purchase price for the contract but have a delivery amount due of only $225 000 Because the amounts payable and due are netted out, only $25 000 will change hands; you, the seller of the contract, will receive $25 000 from the buyer