Equity Index Futures Trading

Overview

Equity index futures are designed to trade in relation to a specific equity index or ETFs (Exchange Traded Funds) which are comprised of a basket of securities that trade as smaller versions of the index or ETFs. These products allow our clients to participate in basket of equities without having to purchase to full margin value of single equity securities.

We believe the unique combination of many of the best features of other investments presents financial opportunities for both institutional and professional clients, including:

• Tax efficiency
• Lower Capital Gains Tax
• Advantages of Stocks & Mutual funds combined
• Lower Margin costs
• Lower Commissions vs. Equities
• Highly Liquid Investments
• Transparency
• 24-Hour Trading
• Hedging
• Portfolio Diversification
• Cash Management
• A wide array of investment strategies

In recent years, these unique features and benefits have helped equity index futures explode in popularity and emerge as one of the most flexible, multi-purpose investment products available.

Please note that the following descriptions contain statements of opinion and should be recognized as such.

Tax Efficiency

Equity Index Futures offer greater tax benefits because they generate fewer capital gains due to tax structure of futures products vs. equity products. Additionally, investors are not required to sell securities to meet cash redemptions or potentially generating capital gains tax liability. Keep in mind that the sale of an equity index future contract will generate capital gains/losses for the investor liquidating. An investor can also sell a security that is underperforming and claim a tax loss but retain exposure to its sector by purchasing an equity index future contract (please consult your tax advisor about a tax loss strategy).

Lower costs

Commission expenses can have a significant impact on returns for investors. In general, equity index futures, have significantly lower commissions than their equity/ETF counterparts. And, since they trade as a single futures product, they are insulated from the costs of having to buy and sell securities to accommodate shareholder purchases and redemptions.

Transparency

Equity Index Futures are designed to generally replicate the holdings and correspond to the performance and yield of their underlying index and its basket of securities.

Highly Leveraged & Liquid Investments

Equity Index Futures can be:

• bought and sold nearly 24-hours a day
• purchased with high leverage
• sold short, even on a downtick (unlike common stocks)
• traded using stop orders and limit orders, which allow investors to specify the price points at which they are willing to trade

Diversification

Because each equity index futures contract represents a basket of securities, it inherently provides diversification across an entire index. Equity Index Futures cover virtually every segment of the equity market, providing an easy and convenient way to adjust the investment mix of a core portfolio.

Hedging

Equity Index Futures can be purchased, highly leveraged and sold short (even on a downtick), which has opened up risk management strategies for individual investors that were once available only to large institutions. For example, they can be sold short to hedge a core stock portfolio or interest rate fluctuations. This allows investors to keep their portfolio intact while protecting them from market losses. In a declining stock market or rising interest rate environment, profits from a short position can offset some of the losses in a portfolio.

Cash management

Equity Index Futures have often been used to "equitize" cash, providing a way for investors to put cash to work in the market or maintain allocation targets while determining where to invest for the longer term.

Wide array of investment strategies

Investors can capitalize on the convenience and flexibility of equity index futures to pursue a wide variety of investment strategies.

CME Equity Index Futures