Single Stock Futures

Single stock futures (also known as SSF) are futures markets that are based upon an individual stock (such as APA for Apache), rather than an entire stock index (such as the Dow Jones). Single stock futures are exactly the same as any other futures markets, and are traded in exactly the same way.

Single stock futures are available for many US, European, and Asian stocks, and are offered through futures exchanges, such as OneChicago in the US, or the DTB (Eurex) in Europe.

Single stock futures have been traded in Europe and Asia for many years, but due to regulatory indecision, single stock futures have only been available in the US since 2002. In addition (and as usual), the SEC (Securities and Exchange Commission) restricts US traders from trading any single stock futures that are located outside the US.

Single Stock Futures Contracts

As they are futures markets, single stock futures trade futures contracts, and like other futures contracts, they provide all of the required trading information for the single stock futures market. For example, the single stock futures contract for AVP (Avon) is as follows:

• Symbol (IB / Sierra Chart Format) : AVP
• Expiration date (as of March 2008) : March 20 2008
• Exchange : ONE
• Currency : US Dollar
• Multiplier / Contract value : 100
• Tick size / Minimum price change : 0.01
• Tick value / Minimum price value : $1

As single stock futures are based upon individual stocks, each single stock futures contract is worth 100 shares (hence the multiplier of 100). Single stock futures contracts are available monthly and quarterly, and use the standard futures contract expiration dates (the third Friday of the expiration month).

Trading Single Stock Futures

As single stock futures are based upon an individual stock, they can be traded instead of the actual stock. Each futures contract is worth 100 shares, so a trader that wanted to trade 1000 shares of XYZ could trade 10 single stock futures contracts instead.

There are a couple of advantages to trading the futures over the stock:

• Lower Margin - Trading single stock futures requires less margin than trading the underlying stock directly
• No Day Trading Restrictions - As they are futures markets, single stock futures do not have any day trading restrictions
• Lower Commission - Single stock futures usually have lower commission than the actual stock

However, as single stock futures are relatively new in the US, many single stock futures markets are not very actively traded, so their charts tend to be useless (e.g. there are not enough trades to make a decent chart). A good solution to this, is to chart the underlying stock, but still make trades on the single stock futures market. Single stock futures prices follow the underlying stock prices, so this will provide a usable chart, while still allowing you to make trades on the single stock futures.