Your first paragraph ...As a trading vehicle, Single Stock Futures (SSF) are a traders' dream come true.
In legal terms, an agreement between two parties where one party commits to buy a stock and one party to sell a stock at a given price and on a specified date.
The contract is completed at expiration or, in most cases, by offset prior to the expiration date.
The many advantages are:
(1) Greater leverage: Lower margins (20% vs 50% for stocks) and no interest to pay.
(2) Greater cash flow opportunity: Treasury Bills can be used as collateral.
(3) Easier and cheaper to sell short: No need to borrow stock, no uptick rule, no dividends to make up. SHORTS even earn the "basis" premium that the LONGS pay.
(4) An almost perfect hedging device, SSFs are more efficient than options. No strike prices involved. The only difference in price, between the futures contract and the underlying stock, being the basis which zeros out by expiration.
(5) Foreign investors can reduce currency risk.
(6) Additional sophisticated trading strategies not otherwise available.
(7) Broad liquid markets make these ideal trading vehicles.
If you like exchange traded funds, you'll love single stock futures.
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