Prajna Capital - An Investment Guide

The chief advantage of stock futures is the ability to buy on margin. Investing on margin is also called leveraging, since you're using a relatively small amount of money to leverage a large amount of stock. For example, if you have $1,000 to invest, you can by 10 shares of IBM stock. But with the same $1,000, you can buy a futures contract for 50 shares of IBM stock. It's true that you can also buy traditional stock on margin, but the process is much more complicated. When buying stock on margin, you're essentially taking out a loan from your stockbroker and using the purchased stock as collateral. You also have to pay interest to your broker for the loan. The difference with stock futures is that you're not buying any actual stock, so the initial margin payment is more of a good faith deposit to cover possible losses. I­t's also much easier to go short on a stock future than to go short on traditional stocks. To go short on a futures contract, you pay the same i...

Single stock futures can be risky investments when purchased as standalone securities. There's a possibility of losing a significant chunk of your initial investment with only minimal market fluctuations. However, there are several strategies for buying stock futures, in combination with other securities, to ensure a safer overall return on investment. One of the most effective stock future strategies is called hedging. The basic idea of hedging is to protect yourself against adverse market changes by simultaneously taking the opposite position on the same investment. Let's say you buy a share of traditional stock at $50. To make money with that stock, the price has to go up over time. But that's not necessarily true with stock futures. In addition to buying the stock, you could take a short position to sell the same stock on the futures market in three months. This way, even if your stock price goes down in three months, you'll make up some -- or even more -- of the mo...

When you buy or sell a stock future, you're not buying or selling a stock certificate. You're entering into a stock futures contract -- an agreement to buy or sell the stock certificate at a fixed price on a certain date. Unlike a traditional stock purchase, you never own the stock, so you're not entitled to dividends and you're not invited to stockholders meetings. In traditional stock market investing, you make money only when the price of your stock goes up. With stock market futures, you can make money even when the market goes down. Here's how it works. There are two basic positions on stock futures: long and short . The long position agrees to buy the stock when the contract expires. The short position agrees to sell the stock when the contract expires. If you think that the price of your stock will be higher in three months than it is today, you want to go long. If you think the stock price will be lower in three months, then you'll go short. Let's ...

Getting Started in Futures Trading By visiting this page on Futures Education page, you've taken the first step in learning everything you need to know about futures trading, commodity futures trading and all the little things that will help you make your financial goals a reality. The pages on this site are specially designed to be educational and informative for both the beginner and the advanced trader. Trading Facts When getting started, it's important to know the facts. Knowing the facts about futures trading is crucial for people who work in one of the most adventurous corners of the business world. You are about to embark on a journey where the explorer must rely solely on his common sense and ingenuity, and face challenges that require intelligence, strength, and an adventuresome spirit. There are risks, but futures trading is a journey where the rewards justify the risks. What is the Futures Market? Futures markets have been described as continuous auction markets and ...