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Stock index futures will soon return to normalization. What does stock index futures mean?
The full name of stock index futures is stock price index futures, which refers to standardized futures contracts with stock price index as the subject matter. The two sides agreed that on a specific date in the future, the underlying index can be bought and sold according to the size of the stock price index determined in advance, and the difference will be settled in cash after the expiration. As a type of futures trading, stock index futures trading has basically the same characteristics and processes as ordinary commodity futures trading. Stock index futures are a kind of futures, which can be roughly divided into two categories, commodity futures and financial futures.

major function

Avoid investment risks

When investors are not optimistic about the stock market, they can short the futures through the hedging function of stock index futures to lock in the book profit of the stock, so that they don't have to sell their stocks, causing a panic decline in the stock market.

arbitrate

Arbitrage refers to the principle that the basis difference between stock index futures and spot index will converge to zero on the delivery date. When the futures premium exceeds a certain range, short the stock index futures and buy the index components of the stock index futures at the same time, or when the futures premium exceeds a certain range, make multiple stock index futures and short the stock index ETF at the same time to obtain risk-free income.

Reduce stock market volatility

Stock index futures can reduce the daily average amplitude and monthly average amplitude of the stock market and restrain the irrational fluctuation of the stock market. For example, the daily average amplitude of the Shanghai and Shenzhen 300 Index was 2.5 1% and the monthly average amplitude was 14.9% in the five years before the introduction of stock index futures, and it was 1.95% and 10.7% in the five years after the introduction.

Enrich investment strategy

Financial derivatives such as stock index futures provide investors with risk hedging tools, which can enrich different investment strategies, change the status quo of consistency of stock market trading strategies, provide investors with diversified wealth management tools, and achieve long-term stable income goals.