A Single Stock Futures (SSF) contract is an agreement to buy or sell a selected underlying single stock listed on the exchange on a future date at a price that is determined today. As in all futures contracts, each SSF has an expiry date.
Standard quantity of a specific underlying asset
Expiry on a predetermined future date
HOW SSFs WORKS
Investor & future counter make an agreement for stock future
It could be financial instrument or commodity for future exchanges
Price is determined by today / during investment day
Increase in price it generates profit if not loss will happen.
DIRECT SHARE INVESTMENT VS SINGLE STOCK FUTURES
Investor B also certain that Airasia Bhd shares will rise, but invest the same amount of money in Airasia Bhd SSFs. His RM5000 cash enables him to buy 40 Airasia Bhd SSF contracts, thus making him a profit of RM8000 over the same period of time which is 13 times the profit made by investor A.
Investor A is sure that Airasia Bhd shares will rise from current price of RM 1.64 and since he only has RM5000 cash available, he buys 3000 shares. 1 month later, the price of Airasia Bhd is trading at RM 1.84. Investor A than sells all 3000 shares and makes RM600 profit.
EXAMPLE FUTURE COUNTERS
Bursa Malaysia Bhd
Telekom Malaysia Bhd
Maxis Communications Bhd
May be allowed to withdraw excess funds from the trading account.
GENERATES THE PROFIT
Need to replenish account within a stipulated time. Failure to do so may result in forced liquidation of position.
PRICE DECREASE/ LOSS
PROFIT VS LOSS
WHAT WILL HAPPEN?
FUTHER INFORMATION :
KNOW ABOUT SINGLE STOCK FUTURES? FIND IN THIS SLIDE.