What is the reason that futures exist on stock indices, but not on individual stocks? My understanding is that individual stocks have options, but not futures. Is there no market for futures on individual stocks?
asked Jan 25, 2015 at 17:29
-
2The question in your first sentence is based on a false premise. There do exist futures on individual stocks. Google "single stock futures".– Chris W. ReaCommented Jan 25, 2015 at 17:46
-
Why not make that an answer Chris? "Yes"– JohnFx ♦Commented Jan 25, 2015 at 18:42
Add a comment
|
4 Answers
There's a market for single stock futures. The market (however small) is OneChicago, "an Equity Finance Exchange offering security futures products." I don't know how easy access is for retail investors.
As others have pointed out, they do in fact exist. But it may be worth pointing out a possible reason that they are not as popular as commodities futures.
If I want exposure to the oil market (for example,) buying oil futures has a big advantage over buying oil. Namely, I don't actually need to store the oil; I can roll over my position rather than taking delivery.
On the other hand, buying single stock futures does not have such a compelling advantage over buying the stock itself, so most people would simply do the latter. (Although stock futures might provide some other advantages in some very specialized situations.)
-
People rarely have a need for 100 UTX (for example) shares at a given time, at a given price in the future. Commodity traders often have a need for 100 gallons (and more!) of oil at a given time, at a given price in the future.– Peter K.Commented Jan 26, 2015 at 13:24
-
1@PeterK. That's a good point. I was only thinking about commodity futures from the point of view of a speculator, and didn't even think about the applications to hedging. Commented Jan 26, 2015 at 20:17
Things very similar to the idea of a "future" that routinely apply to single stocks are "warrants" and "options".
There is indeed a market for single stock futures, and they have been trading on the OneChicago exchange since 2002. Futures are available in 12,509 individual stocks, according to the exchange's current product listing. One advantage they offer over trading the underlying stock is the significantly higher leverage that is available, combined with the lack of pattern day trader rules that apply to stocks and similar securities.
Single stock futures have proven to be something of a regulatory challenge as it has been unclear whether their oversight is the remit of the SEC/FINRA or the CFTC/NFA.
