“In the past couple of years, the U.S. stock market has been volatile. But stock futures are one way to hedge your investments so that no single market fluctuation — way up or way down — will ruin your portfolio.
Single stock futures can be risky investments when purchased as standalone securities. There’s a possibility of losing a significant chunk of your initial investment with only minimal market fluctuations. However, there are several strategies for buying stock futures, in combination with other securities, to ensure a safer overall return on investment.
One of the most effective stock future strategies is called hedging. The basic idea of hedging is to protect yourself against adverse market changes by simultaneously taking the opposite position on the same investment.”
” It allows traders to buy or sell a contract on a financial index and settle it at a future date. An index futures contract speculates on where prices move for indexes like the S&P 500. As futures contracts track the price of the underlying asset, index futures track the prices of stocks in the underlying index. “
“In finance, a single-stock future (SSF) is a type of futures contract between two parties to exchange a specified number of stocks in a company for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to take delivery of the underlying stock in the future, the “buyer” of the contract, is said to be “long”, and the party agreeing to deliver the stock in the future, the “seller” of the contract, is said to be “short”. The terminology reflects the expectations of the parties – the buyer hopes or expects that the stock price is going to increase, while the seller hopes or expects that it will decrease. Because entering the contract itself costs nothing, the buy/sell terminology is a linguistic convenience reflecting the position each party is taking – long or short.
SSFs are usually traded in increments/lots/batches of 100. When purchased, no transmission of share rights or dividends occurs. Being futures contracts they are traded on margin, thus offering leverage, and they are not subject to the short selling limitations that stocks are subjected to. They are traded in various financial markets, including those of the United States, United Kingdom, Spain, India and others. South Africa currently hosts the largest single-stock futures market in the world, trading on average 700,000 contracts daily.”
These news can move the US stock market after the very strong rally yesterday.
Stock market news, the $2 trillion stimulus deal
“The White House and Senate leaders struck a major deal early Wednesday morning over a $2-trillion package to provide a jolt to an economy struggling amid the coronavirus pandemic, capping days of marathon negotiations that produced one of the most expensive and far-reaching measures in the history of Congress.”
US stock market futures erased their losses earlier today, March 23, 2020, after a press release by the Fed. In the press release titled ” Federal Reserve announces extensive new measures to support the economy” some of the measures to support the economy are:
Support for critical market functioning. The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. The FOMC had previously announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities
Supporting the flow of credit to employers, consumers, and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing.
Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.