I understand that the mar
Yes I like Rutgers a lot, that’s where my company recruits most of the youngsters. And the reason he said that is b/c it’s in state for us and it’s so inexpensive (not b/c it’s a bad school). If his sister went there It would almost be free.
“Working remotely will become quite normal now, and certain stocks will benefit.”
I have wondered whether this will make any noticeable different to companies that build the “stuff” that makes the internet work.
Since we are here to help… Can someone explain the stock futures to me? I have a hard time understanding this.
I also see right now it seems like a 1:1 correlation to what will happen to our stock market but of course this would be too easy to predict the market… Like it’s up now and maybe our market will rebound a bit. It was down yesterday and our market crashed.
Again, just don’t have a handle on it. Not planning on investing in it just want to understand it better.
Thx. ?
@Knowsstuff I don’t know what you know, so I will assume you know nothing about equity futures.
The mini-S&P 500 allows you to buy or sell in a live and liquid market at most hours of the day or night, if you’d like. Therefore, it acts as a reasonable proxy for the movement in the spot S&P 500 if it were to be open all night. By the time the stock market opens at 9:30am Eastern time, the futures price will usually be fairly close to the open price of the stock market with an adjustment for the embedded future settlement date premium or discount. The spot market is open right now and futures are trading alongside, but your financial news station will display the spot/cash market while it is open.
@bloomfield88 . I have no clue what they are and is why I was asking . No , I am not looking to trade them or anything like that. I just don’t have a great understanding on what they are and how they impact everything else. I really appreciate you taking the time to explain and this was the detail I was looking for. I would quickly lose my money if I played around with this…LOL…Just as my name implies I like to “Knowstuff” especially when I don’t understand it.
Many great people have said and I subscribe to it " Don’t invest in things you don’t understand"!!
Thx.
Stock futures are essentilly a bet or prediction or insurance involving whether the stock market (or an individual stock) will rise or fall within a specific time period. (There is also a futures market for commodities such as farm crops and metals.)
A farming operation or farmer may want to insure against price fluctuations of his crop (rice, wheat, corn, hog bellies, soybeans, etc.) from start of the growing season until the products reach the market. This is a primary use of futures contracts as a hedge against market fluctuations = insurance.
“Out-of-the-money” options are used when one feels that a dramatic rise or fall will occur in the market or in a particular stock within a specified time frame.
“In-the-money” options are expensive because the stock market or individual stock has already hit a certain price known as the option’s “strike price”.
If, for example, you felt strongly that a significant downturn was about to occur (with a day to a few months time), you could insure your current holdings in XYZ stock by buying “put” options betting that XYZ stock would decline within that time period. If the stock declines, then your put options should rise in value thereby offsetting any paper losses in your stocks (which you wanted to hold for one reason or another).
A bet or insurance against a rising market is named a “call” option.
Options & futures contracts are a leveraging method. One can control large amounts of stocks or commodities for pennies on the dollar.
Trading in the options market and futures market can get quite complex.
Traders often engage in a form of sophisticated gambling and may buy opposing positions simultaneously in order to alter the odds in their favor at the cost of limiting both the possible downside (loss) and upside (profit or gain).
Nobody knows when tops and bottoms are. The key thing is to have a well-formulated plan.
I generally am not a fan of keeping a lot in cash (besides what you think you’d need to survive a severe downturn, so maybe 1-2 years living expenses, or if you know you’ll need to spend the cash in the next couple of years). I am a fan of a balanced portfolio. In nearly all equities if several decades out from withdrawals, getting to 60/40 or even 50/50 close to retirement time. As we’ve seen, bond yields can go lower even when they are at historic lows. If you are far from withdrawal time, you could shift a small allocation to equity and the stock market tanks and shift a small bit to bonds as the stock market rises at certain levels.
When trading in futures or options as a method to make money, the trader’s enemies are time and stability in the market.
Options & futures traders want an active market that experiences dramatic fluctuations during a specified time frame in order to make money. If there is no or little movement in the market, futures & options decline in value simply by the passage of time since all have an expiration date (usually–not always-- within 3 or 6 months time).
Inexperienced traders will simply bet on one direction for the stock market or for the commidity price–either up or down.
Sophisticated traders bet both positions at the same time in order to limit losses at the expense of limiting the possible gain or profit.
When purchasing options or futures contracts, the primary determinants of the price of the option is based on the underlying asset price (stock or commodity) and length of time of the options or futures contracts (a contract covering 3 months time should be less expensive than buying 6 or 9 months of time).
Aren’t futures and options different in that, with a future, the transaction must take place on the specified date, while with an option, the option holder can choose whether or not to make the transaction on or before the specified date?
The amount of living expenses to survive a severe downturn can depend on individual situation. Remember to consider medical insurance costs that one will have to bear after losing a job that previously subsidized medical insurance.
@ucbalumnus : There are active markets for both options & futures contracts. Holders can trade futures & options contracts on a daily basis. Neither contract must be held to maturity unless, I suppose, if being used as a guarantee.
Thx so much for those that answered my questions. Totally appreciate it. It is starting to make sense and I know enough to walk away. Never looking to invest in it. Just wanted to have a basic understanding of it. I also have a balanced portfolio that was doing great. Actually still is well sorta. But will when things come back. It was more 85/15 but we did something to limit the drop of the market on about 25% of the portfolio. The managers will just take the dividend profits and buy lower priced stocks which is like everything now so as the market returns we get that benefit
In 2008, we didn’t really do badly so hopefully it won’t be as bad as the media is saying.
Mr. B: "The markets begin to look like a typical biotech stock on a normal trading day. " ?
S&P 500 futures limit down tonight. Looks like this week will be yet another wild rollercoaster ride.
OK.
I am getting there but… I thought you can’t count on the futures market to predict what will happen during the day with the future being at night per se But it sure seems like, at least for now, there is a strong correlation when the futures is down the dow is down and when it’s up the same.
Of course it can’t be that easy. What am I missing here?
I really do appreciate the explanations. I know many of you deal with this professionally so I really appreciate the time.
Overnight the futures will predict the day, if there is no substantive new information or money flows at the cash/spot market open or during the day. As a simplistic example assume there are two big announcements over a 24 hour period and otherwise extremely quiet. One is negative and one is even stronger positive.
Scenario A: At 1am the negative announcement hits and the futures tumble -3%. At 4am the positive announcement hits and the futures are now +5%. Absolutely nothing happens during the day so the cash/spot market opens roughly +5% and closes there as buyers and sellers agree at that price with no new information.
Scenario B: At 1am the negative announcement hits and the futures tumble -3%. The cash markets open -3%. At 11am the same positive announcement hits and the cash market reverses and closes +5%.
Scenario C: Nothing happens overnight and the futures are flat. The cash markets open flat. At 10 am the negative announcement hits and the cash market falls -3%. Then, at 11am the same positive announcement hits and the cash market reverses and closes +5%.
Hopefully, that helps. Obviously, there are many more than 2 events per day and many participants buy and sell for more than just daily news events, but a simple example should help explain that the futures markets are roughly correlated to the spot/cash market, but futures happen to be open more hours and hence take in all the market information and participants while the spot market is closed overnight and can’t react until it opens at its prescribed time.
Can anyone trade futures ?
Or is it difficult for an individual to qualify financially in order to open a futures trading account ?
It’s easy. (I mean opening an account. Not making money trading futures. LOL!)
And expensive !
One of my relatives lived in Chicago. Several neighbors were future traders. Their wealth fluctuated–to say the least.