Stock investing has long been the favored approach to making
profits in the financial markets. The basic reasons for trading and/or
investing in stocks have traditionally been these:
To participate in long-term moves consistent with economic
growth
• To generate long-term profits in pension and retirement
accounts
• To capitalize on short-term market swings
• To protect savings from the negative effects of inflation and
disinflation
• To participate in new growth industries and technology without
the need to actually be involved in these businesses
The other reasons for trading and investing in stocks are examined
in detail later on.
As you can see, the reasons for participating in stocks and futures
are not too dissimilar. The differences between these two vehicles
are, however, significant, particularly in relation to a time frame—
that is, the length of time a position is held—and margin requirements.
The SSF market attempts to marry these two vehicles into
one instrument that seeks to maximize the benefits of each in a
grand and long overdue union. Although the idea of trading futures
on individual stocks has been with us for many years, the regulatory
climate did not permit such trading in the United States until the
implementation of the Commodity Futures Modernization Act
(CFMA). SSF trading in U.S. markets was prompted by the introduction
of Universal Stock Futures at the LIFFE exchange in
London. Now that the market is available, it behooves all serious
investors and traders to become educated in the vehicle that
promises to forever change the investment landscape. Let us now
begin our journey into the SSF market.