Single Stock Futures Expand Your Trading Day

For years, stock market hours have limited trading in equities. But that's changing in more than 50 companies thanks to single stock futures.

The new products launched on CME a month ago. They trade from 6 p.m. ET Sunday through 5 p.m. ET Friday, with a one-hour maintenance period between 5 p.m. and 6 p.m. each day -- the same basic schedule as popular index futures like E-Mini S&P 500 (@ES) and E-Mini Nasdaq-100 (@NQ).

The result? Traders can respond to news virtually around the clock with standardized contract terms and short selling without the need to borrow. This can offer opportunities for stock, options and futures traders, as we'll see below.

Two Sizes, Familiar Stocks

Single stock futures are relatively straightforward because their value tracks the price of an individual stock.

The standard contracts represent 100 shares of the underlying company. Micro contracts, available on 22 stocks at launch, represent just 10 shares.

For example, someone wanting to control the equivalent of 100 shares could use one standard contract. Someone wanting exposure to 20 shares could use two Micros.

Contracts are financially settled, so shares don't change hands at expiration. CME currently lists quarterly expirations in March, June, September and December. 

Major companies including Nvidia (NVDA), Tesla (TSLA) and Apple (AAPL) are supported. 

Capital Efficiency

Another potential benefit is capital efficiency.

Buying stock generally requires investors to pay for the shares or purchase them in a margin account. Futures work differently because traders post margin to go long or short.

Positions can be taken with less upfront capital than buying or selling short the equivalent number of shares. The same mechanism works in both directions, making it relatively straightforward to take bullish or bearish positions.

Going short can be especially interesting. Shorting stocks traditionally requires borrowing shares, which may involve availability constraints and borrowing costs. Single stock futures let traders establish bearish exposure without borrowing the underlying shares.

Leverage, of course, cuts both ways. Using less upfront capital doesn't reduce the potential risk of the position. Gains and losses are still based on the full value represented by the contract.

An Alternative for Options Traders

Single stock futures may also be interesting for options traders.

Options can provide tremendous flexibility, but they come with additional variables. Traders need to consider implied volatility, time until expiration and the relationship between the strike price and underlying stock.

Futures are simpler directional instruments. If the underlying stock rises, a long futures position generally gains value. If it falls, the position generally loses value.

There's also no option premium being eroded by theta.

That could make single stock futures useful when traders have a directional view but don't necessarily want exposure to the additional variables associated with an options position.

Another Tool for Futures Traders

The new products can work in the opposite direction as well.

Futures traders have traditionally focused on broad indexes like the S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average. They already understand concepts like contract size, margin and quarterly expirations.

Single stock futures let them apply those same skills to individual companies.

This means that in addition to taking a view on a broader index, futures traders can focus on specific companies driving the index.

Stocks Meet Futures

Stock traders have largely operated around the same 9:30 a.m.-4 p.m. schedule for more than a generation. Futures traders, meanwhile, have enjoyed nearly around-the-clock markets, straightforward long and short exposure and capital-efficient margin.

Single stock futures bring those worlds closer together.

They don't replace stocks or options. Instead, they give active traders another way to approach many of the market's most popular companies — with two contract sizes, nearly 24-hour trading and the familiar mechanics of the futures market.

For traders accustomed to waiting for the opening bell, that could open an entirely new part of the trading day.

Single Stock Futures on TradeStation

TradeStation customers can access single stock futures with the same tools they already use for major products like the E-mini S&P 500 and E-mini Nasdaq-100.

TITAN X, our newest platform, offers a sleek and focused interface with major alternatives for customization. TradeStation's award-winning Desktop environment gives an extra level of analytics, with Easy Language and backtesting. Matrix, a powerful depth-of-market price ladder, is available on both TITAN X and Desktop. 

Mobile offers a fast and secure interface. HUB lets traders place orders from a convenient account home on our website.

In conclusion, markets evolve and information spreads. It's a one-way process of increasing flexibility and choices for traders. Single stock futures are another step in that evolution, with more access and capital efficiency for active traders.

Security futures are not suitable for all investors. To obtain a copy of the futures risk disclosure statement visit www.TradeStation.com/DisclosureFutures.

Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission. TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.

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