The first thing you need to understand is what futures trading is. The so-called futures trading refers to the trading behavior of both parties buying and selling futures contracts on the futures exchange. In the futures market, the purpose of most futures transactions is not to obtain physical objects at maturity, but to avoid price risks or make profits through hedging. In actual futures trading, when concluding futures contracts, both parties need not have spot and full cash in hand, but only pay a deposit to the exchange according to a certain proportion of the transaction amount. In other words, this means that the buyer can have no cash and the seller doesn't have to have cash.

The biggest difference between stocks and futures is that stocks can only be traded in cash, and short selling is prohibited. Because stock prices can go up and down and futures can be short, there are bulls and bears in futures trading. Buy first and then sell in the hope that prices will rise in a certain period in the future. Sell first and then buy, hoping that the price will fall in a certain period in the future. This is called short position. To make money as a short seller is to buy down, that is, to sell at a high price and then buy at a low price to earn the difference.

What is stock index futures?

Stock index futures (hereinafter referred to as stock index futures) is a financial futures contract with the stock price index as the subject matter. The risks faced by stock market investors in the stock market can be divided into two types. One is the overall risk of the stock market, also known as system risk, that is, the risk that the prices of all or most stocks fluctuate together. The other is individual stock risk, also known as non-systematic risk, that is, the risk of market price fluctuation faced by holding a single stock. Through portfolio, that is, buying a variety of stocks with different risks at the same time, we can avoid unsystematic risks well, but we can't effectively avoid systemic risks brought about by the decline of the whole stock market. Since 1970s, the volatility of stock markets in western countries has become increasingly fierce, and it is more and more urgent for investors to avoid systematic risks in the stock market. Because the stock index can basically represent the trend and range of stock price changes in the whole market, people began to try to convert the stock index into a trading futures contract, and use it to hedge all stocks to avoid systemic risks, so stock index futures should be born.

The characteristics of stock index futures: the function of stock index futures trading;

1. More investment opportunities; 1. Avoid system risks;

2. Investment is easier; 2. Active stock market;

3. Low transaction cost; 3. Diversify investment risks;

4. Higher leverage ratio; 4. Can be hedged;

This market is highly liquid. 5. Conducive to asset allocation;

6. New investment and

Speculative varieties.

The significance of introducing stock index futures;

1. can effectively avoid systemic risks in the stock market;

2. Conducive to the development of institutional investors and investment funds; suspended matter

3. Reduce the selling pressure in the stock spot market;

4. It is beneficial to enliven the stock market.