Stock Index Futures

Stock Index Futures is a statistical measure of change in price stocks which represents stock market as a whole. Stock index is quantifying the average of change in any stock price trading in stock exchange. Stock Index Futures is providing a discretion to investors to participate in up and down of stock prices in stock exchange without deciding to trade on one particular type of stock.

In investing, escpecially in stock investments, any investors will be facing several risks arising from change in stock value. Trading in stock index futures is an alternative investment in stock trading that can be reducing the risks and provide benefits as a shield of portfolio risk. Stock index futures is a contract to buy or sell any stock index at certain price, in any amount and within a time period that stipulated by exchange and related institutions to guarantee an agreement of trading contracts will be held properly and fair.

A fundamental difference between stock investments and futures trading is the possibility for investors to sell any contract in advance and then close the contract in maturity. In this case, this allow any investors to take long position which means investors buy a futures contract with expectation that price will be going up for taking profit or investors will take short position which means by selling futures contract in advance with expectation that price will be going down.

Stock index provides a flexibility to investors to participate in the up and down movement of stock price without deciding to trade on one particular type of stock. As an instrument of investments that traded in a margin trading, futures contract provide investors the ability to buy and sell any contracts in a value that much higher than available capital.

Risk in Futures Trading

In stock index futures trading, every investors should have a trading plan to manage an acceptable level of risk. Trading plan is prepared based on technical and fundamental analysis. By having a trading plan and good in utilizing those two analysis, risk level and wrong in positions can be minimize. Some strategy in risk management which can be used as stop loss, cut and switch, averaging and trailing stops. With trailing stop facility, investors can shift the stop level to cover already obtained profits.