Single Stock Future Trading


Overview

vCap Futures provides Single Stock Futures (SSFs) to its institutional and professional clients for hedging and speculating needs. SSFs include some of the most popular and actively traded stocks in the U.S., such as Microsoft, Pfizer, General Electric, IBM, Citigroup, AOL Time Warner, and Johnson & Johnson.

Single stock futures values are priced by the market in accordance with a theoretical pricing model based on a formula:

Futures Price = underlying stock price x (1+ annualized interest rate - dividend)

All SSFs contracts have expirations dates. There are three basic approaches for managing the expiration of SSF contracts:

  • Offset your position
  • Wait until the contract expires, then make or take delivery
  • Roll the position over from one contract month into the next

SSFs vs. Futures

SSFs are futures contracts on individual stocks and are agreements to deliver 100 shares of a specific stock at a designated date in the future or expiration date. The buyer has an obligation to purchase shares of stock and the seller has an obligation to sell shares of stock at a specific price at a specific date in the future. Single-Stock Futures contracts are completed via offset or the delivery of actual shares at expiration.

Security Futures Order Types

Two order types - All-or-None (AON) and Immediate-or-Cancel (IOC) - are unique to single-stock and narrow-based index futures. However, exchanges offering security futures also accept other orders, such as market, limit, stop, stop limit and stop with limit.

  • All-or-None (AON): This order type specifies both a quantity and price. The order will be filled only if the entire quantity can be filled at the specified price. Thus, no partial quantities will be filled.

  • Immediate-or-Cancel (IOC): An IOC order will be presented to the market, filled to the extent possible, and then immediately cancelled. Thus, you may receive partial fills on an IOC.

Advantages

Single-Stock Futures offer our institutional and professional clients the following advantages:

  • With margin requirements of 20%, single stock futures provide a highly capital efficient way to participate in equities.
  • No uptick rule for short sales
  • Greater leverage
  • Eliminates efficiencies inherent in the stock loan process
  • Opportunity for improved cash flow
  • Cleaner hedge relative to options
  • Potential tax benefits

NFA - Security Futures Risks NFA - Security Futures Risks