A futures contract that is based on individual exchange-listed stocks. This constitutes a binding commitment made through a futures exchange to buy or sell a single equity in the future. Each contract is standardized in terms of size, expiration, and tick movement. Individual equity futures are particularly used by buyers and sellers of individual physical shares.
For example, buyers use these contracts as a hedge against rising prices in the markets of physical shares. A rise or loss in the physical market price over the period of the hedge will be offset by a gain on the futures transaction. On the contrary, a fall or gain in the physical market price over the period of the hedge will be offset by a loss on the futures transaction. Whatever the outcome, the buyer is protected against rising prices over the period of the hedge. Furthermore, the buyer of a futures contract can benefit from a favorable market without having to pay down the full capital cost of buying the underlying share.
The individual equity futures is also known as single stock futures.
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