How To Trade the New Single Stock Futures doc

[...]... other questions and issues about the use and understanding of SSFs: • • • • • Do investors understand the SSF market? Do stock investors and traders know how to trade futures? Do futures traders understand how to trade stocks? Are stock traders prepared for the volatility of futures? Are futures traders prepared for the fundamentals that often affect stocks? • Are stock traders sufficiently educated and... both the futures and the securities industries was a new vehicle, a new instrument, a new game that traders and investors could play The time was optimal for the introduction of SSFs ❚ How Futures Survived While Stocks Crashed Another positive aspect of the new SSF market was the relative stability of the futures markets, even though stocks declined sharply 8 How to Trade the New Single Stock Futures. .. hedge their risk is called “risk transfer.” ❚ What’s in It for the Players? Who takes the other side of the futures transaction, and why? In other words, who will buy the grain from you, why will they buy it, what will they do with it, and how will they sell it if they change their mind? Essentially, there are three categories of “players” in the 16 How to Trade the New Single Stock Futures futures... low in the 40.5 area in January of 1932 Stocks then languished during the Great Depression By the early 1950s, stocks began a trend up as the United States lifted itself out of depression, and investors regained confidence in the economy Stocks continued to rally until the early 1970s, making a low in 1972 from which a lengthy rally developed until the July 1 2 How to Trade the New Single Stock Futures. .. rising price trend that is likely to continue until or unless the fundamental situation changes 14 How to Trade the New Single Stock Futures Prices continue to rise dramatically in the cash market—that is, the immediate or day -to- day market for actual corn as opposed to corn futures Another term for the cash market is the spot market, which refers to transactions made on the spot for immediate delivery,... unwilling to use the futures markets or were unfamiliar with them now had a new and legitimate vehicle by which to either hedge their stock transactions or speculate on stocks with less up-front capital Futures traders, who have long felt that stocks require too much margin or are not sufficiently volatile, now had a new trading vehicle 1 / The Biggest Bull Market in History Comes to an End 9 that allowed them... noted previously, the need to control risk by producers and end users was the 11 12 How to Trade the New Single Stock Futures primary motivation for the creation of this exchange As you will see in the chapters that follow, the impetus for the creation of a SSF market was essentially similar to the impetus for the creation of futures trading in Chicago so many years ago; it was intended to fulfill an economic... possibilities to stock and futures traders Some market experts feared that the ability to trade futures on stocks would reduce investors’ incentive to own stocks Others, however, correctly reasoned that ultimately the increase in market participants would add liquidity, volume, and numerous new strategies to the markets, thereby enhancing the risk-transfer process and with it the overall functioning of... compensation for the wrongs that had been committed But, of course, investors didn’t get their money back; instead, it went to the 6 How to Trade the New Single Stock Futures government By late 2002, SEC investigations were rampant as investors and the government sought victims to be held accountable for losses so many investors suffered Even the once highly respected Martha Stewart was implicated in a stock scandal... vehicles in the United States Eventually, however, the new market was ready to trade At first, only professional traders were legally permitted to participate in a field limited to 30 stocks, but eventually the market was opened to the trading public Although SSFs offer great profit potential, it is reasonable to ask whether investors and traders are able to make effective use of SSFs Here are other questions . of vast new possibilities to stock and futures traders. Some market experts feared that the ability to trade futures on stocks would reduce investors’ incentive to own stocks. Others, however,. understand how to trade stocks? • Are stock traders prepared for the volatility of futures? • Are futures traders prepared for the fundamentals that often affect stocks? • Are stock traders sufficiently. offered to the public and professional traders as means to various ends. Today’s investor can choose between stocks, bonds, stock options, LEAPS (long-term stock options), single stock futures