Compared with stocks traded in the stock index, stock index futures have important advantages, mainly in the following aspects:
1. Provide convenient short selling.
A prerequisite for short selling is that you must borrow a certain number of shares from others first. There are no strict conditions for short selling abroad, which makes it difficult for all investors to complete short selling in the financial market. For example, in Britain, only securities market makers can borrow British stocks; American Securities and Exchange Commission rule 10A- 1 stipulates that investors must borrow shares through securities brokers and pay a certain amount of related fees. Therefore, short selling is not suitable for everyone. The trading of index futures is not like this. In fact, more than half of index futures trading includes short selling positions.
2. The transaction cost is low.
Compared with spot trading, the cost of stock index futures trading is quite low. The cost of index futures trading includes: trading commission, bid-ask spread, opportunity cost of paying margin and possible tax. For example, in Britain, futures contracts do not need to pay stamp duty, and buying index futures only needs one transaction, while buying a variety of stocks (such as 100 or 500) needs multiple transactions, with high transaction costs. In the United States, a futures transaction (including the complete transaction of opening and closing positions) only charges about $30. Some people think that the transaction cost of stock index futures is only one tenth of the stock transaction cost.
3. Higher leverage ratio
In Britain, a futures trading account with an initial margin of only 2,500 pounds, the trading volume of the Financial Times 100 index futures can reach 70,000 pounds, and the leverage ratio is 28: 1. Because the amount of margin payment is determined according to the market value of the index futures traded, the exchange will decide whether to add margin or withdraw excess according to the price change of the market.
This market is highly liquid.
Research shows that the liquidity of stock index futures market is obviously higher than that of spot stock market. For example, 199 1, the trading volume of FTSE-100 index futures has reached 85 billion pounds.
Judging from the development of foreign stock index futures market, the investors who use stock index futures the most are the investment managers of various funds (such as mutual funds, pension funds and insurance funds). In addition, other market participants mainly include underwriters, market makers and stock issuing companies.