Trading Index Futures

Trading index futures is an an excellent way trade many of the global stock indexes.

Commonly traded stock indexes include the Dow Jones, S&P 500, Nasdaq, FTSE 100, Nikkei, Hang Seng and many mores.

Index future trading can be used for both for both speculative and hedging purposes. If an individual or a fund manager has a large exposure to the Dow and the short term fundamentals suddenly looked very bearish, the Dow index future could be used as a hedge. However, by doing this all gains will be hedged as well as losses.

The pricing of equity index futures usually factors in both the risk free return that could be earned in cash and the amount that could earned from dividends.

There are many advantages to index futures including:

It's much easier than buying all the individual stocks.

It's often much cheaper when commissions than buying individual stocks when commissions are factored in.

There is the option to short sell.

Contracts are traded on margin.

These contracts are ideal for short to medium term trading and combined with margin, excellent returns can be achieved. However, trading on margin always involves considerable risk.

FTSE Futures
A look at FTSE Futures with trading examples

Dow Futures
A look at Dow Futures with a trading example

SP500 Futures
A look at SP500 Futures with a trading example

Nasdaq Futures
A look at Nasdaq Futures, showing how they are more volatile than Dow Futures

Hang Seng Futures
Looking at the Hong Kong stock market

Nikkei Futures
Looking at the contracts on the major Japanese stock index

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