English – Finance – S&P futures


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S&P Futures are financial futures which allow an investor to hedge with or speculate on the future value of various components of the S&P 500 Index market index. The futures instruments are derived from the S&P 500 Index is E-mini S&P Futures. S&P 500 futures contracts were first introduced by the CME in 1982. The CME added the e-mini option in 1997. The bundle of stocks in the S&P 500 is, per the name, composed of stocks of 500 large companies.

Derived Futures[edit]

All of the S&P derived future contracts are a product of the Chicago Mercantile Exchange (CME).[1] They expire quarterly (March, June, September, and December), and are traded on the CME Globex exchange nearly 24 hours a day, from Sunday afternoon to Friday afternoon.[1]

  • S&P 500 Futures (ticker: SP) contract’s minimum tick is 0.25 index points = $62.50[1] While the performance bond requirements vary from broker to broker, the CME requires $21,000 to maintain the position.[2]

Contracts[edit]

S&P Futures contracts are commonly used for hedge or speculative financial goals. S&P Futures contracts are used to hedge, or offset investment risk by commodity owners (i.e., farmers), or portfolios with undesirable risk exposure offset by the futures position.[3]

Quotes[edit]

CME Group provides live feeds for S&P Futures and these are published on various websites like Bloomberg.com,[4] CNN Money,[5] and SPFutures.org.[6]

Trading Leverage[edit]

S&P Futures trade with a multiplier, sized to correspond to $250 per point per contract. If the S&P Futures are trading at 2,000, a single futures contract would have a market value of $500,000. For every 1 point the S&P 500 Index fluctuates, the S&P Futures contract will increase or decrease $250.

US Tax Advantages[edit]

In the United States broad-based index futures receive special tax treatment under the IRS 60/40 rule.[7] Stocks held longer than one year qualify for favorable capital gains tax treatment, while stocks held one year or less are taxed at ordinary income.[8] However, proceeds from index futures contracts traded in the short term are taxed 60 percent at the favorable capital gains rate, and only 40 percent as ordinary income.[7] Also, losses on NASDAQ futures can be carried back up to 3 years, and tax reporting is significantly simpler, as they qualify as Section 1256 Contracts.

See also[edit]

References[edit]

  1. Jump up to:a b c E-mini S&P 500 Futures QuotesCME Group. Retrieved March 15, 2020
  2. ^ Outrights/Vol Scans for MarginsCME Group. Retrieved March 15, 2020.
  3. ^ Hurt, Chris and Wisner, Robert N. “Principles of Hedging with Futures”Marketing and UtilizationPurdue University, May 2002. Retrieved March 15, 2020.
  4. ^ FuturesBloomberg. Retrieved March 15, 2020.
  5. ^ Premarket Stock TradingCNN Money. Retrieved March 15, 2020.
  6. ^ S&P Futures LiveSPFutures.org. Retrieved March 15, 2020.
  7. Jump up to:a b IRS Code, Section 1256(a)&(b).
  8. ^ Topic No. 409 Capital Gains and LossesInternal Revenue Service, February 11, 2020. Retrieved March 15, 2020.

External links[edit]

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