FUTURES AND OPTIONS ON INDIVIDUAL SHARES
Directives and Notices
Stock futures and options offer various advantages and allow them to be complemented with stock trading:
- Short or Short Sale: means to sell an asset that the investor does not own. In this way, the investor benefits from the drop in the price of a share. Through the sale of futures, a short position in stocks can be replicated, without incurring a securities loan, with the only requirement of depositing a margin.
- Leverage: Stock futures allow you to build a portfolio of the same number of stocks with only a fraction of their price. In other words, when buying or selling futures, only the initial margin is immobilized, which represents between 7% and 15% of the value of the traded asset (depending on the value of the margin at all times). The investor can use the leverage to have exposure to a higher amount with a lower outlay of money.
- Flexibility: Investors can use this instrument for hedging, to bet on the rise or fall of the price, make spreads or other types of strategy building.
- Hedge: Futures can be used as a hedge for positions in shares or options of that share. By taking a short position, directional risk is neutralized when a short-term decline is expected.
- Efficiency: Another benefit is that futures allow to enhance profitability since by depositing only a margin of approximately 10% of the contract value, the investor has the remaining 90% to make other investments with the capital that would have been immobilized in the event of having bought the action. Likewise, the initial margin can be integrated in cash or financial instruments such as Fixed Terms, Public Securities, Guarantees, Common Investment Funds, etc.
- Arbitration: Futures allow arbitration against the spot value of the share.