How Stock Futures Work

How to Buy and Sell Stock Futures

Most people are wise to leave their stock futures investments in the hands of a trusted broker.
Most people are wise to leave their stock futures investments in the hands of a trusted broker.
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Single stock futures are traded on the OneChicago exchange, a fully electronic exchange. Individual investors, also called day traders, can use Web-based services to buy and sell stock futures from their home computers. Dozens of companies offer online brokerage accounts to individuals with small fees -- like $0.75 per futures contract -- for each transaction.

Day trading in stock futures should be limited to investors who have an in-depth understanding of how markets work and the risks involved in buying securities on margin. If you're up to the challenge, be prepared to put in significant time to research potential stock purchases and maintain margins on all existing futures contracts. You must be willing to invest many hours every day monitoring the prices of your investments to know the best time to sell or buy. This isn't like day trading in stocks, where price changes generally happen at a slower pace.

A more conservative option would be to open a managed account with a stock brokerage firm. Shop around for brokers and do your research. You need to find someone who clearly understands your investment goals. Once you establish an account, this person will be actively trading with your money. In most broker-investor relationships, the broker is given authorization to buy and sell futures without direct authorization for each trade. The advantage is that the broker is well-versed in the most effective investment strategies for stock futures. The disadvantage is that you'll have to pay a management fee for his or her services [source: Drinkard].

An even more conservative strategy for investing in stock futures is to use a commodity pool. It functions like a mutual fund, where a large group of investors pool their money in the same portfolio. The fund or pool is managed by a team of brokers with expertise in the particular commodity -- like stock futures. Commodities pools are considered safer than an individual managed account because individual investors aren't responsible for margin calls [source: Drinkard].

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  • Drinkard, Tom. Investopedia. "Surveying Single Stock Futures."
  • Thachuk, Rick. "Trading single stock futures." March 1, 2001
  • "Single Stock Futures"
  • Investopedia. "Futures Fundamentals: How to Trade"
  • Investopedia. "Futures Fundamentals: The Players"
  • Investopedia. "Futures Fundamentals: Strategies"