Basic Techniques  |  MAY 2004

Better Returns With Single-Stock Futures by Jeffrey P. Seyler

Better Returns With Single-Stock Futures by Jeffrey P. Seyler What exactly are they, and how can we use them to our advantage? Launched on November 8, 2002, security futures products have been watched by many but traded by few. The reasons for this vary, but lack of volume (and therefore liquidity) seems to be one of them. As with all new products, volume takes time to develop, but these products are becoming more popular little by little, and will continue to increase in volume over time. And in spite of low volume, reports are that the two primary exchanges offering these products (OneChicago and NQLX) have been able to handle both large and small orders with acceptable fill prices quite regularly. Liquidity doesn’t seem to be a problem. SINGLE-STOCK FUTURES EXPLAINED The term security futures products actually encompasses both single-stock futures and microsector indexes. Currently, about 100 stocks are available as single-stock futures, a handful of exchange-traded funds (ETFs), and 15 microsector indexes. For this article, however, I will restrict the discussion to singlestock futures.

by Jeffrey P. Seyler