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Based on strong competition from the CBOE, stock futures in the US are
doomed unless:
1) they provide much more rapid trade execution than options
2) have more liquidity than options
3) provide AS MUCH or more LEVERAGE than options
4) have 23 hr per day trading coverage
No question, only the high volume stocks will be justified for this new
vehicle.
I believe they will have a good chance if ALL 4 items above are attained.
#1 should certainly be easy to attain via electronic trading interface, and
#2 is a matter of marketing and promotion;
#3 is very questionable if the FED is involved (kiss-of-death)
#4 easily done
So, again, #3 is the "key" to success.
> -----Original Message-----
> From: Lawrence Chan [mailto:stnahc@xxxxxxxx]
> Sent: Sunday, February 18, 2001 7:21 PM
> To: fritz@xxxxxxxx; Omega-List
> Subject: RE: stocks suck...electronic futures "rule"-margin requirements
>
>
>
> I think some clarification about stock future is
> needed.
>
> Stock future is very common in asia and europe for
> more than a few years.
>
> it is designed as a derivative for hedging (like
> the index future we have here). of course people
> can use them for speculation (like what we do
> with index future here) but the primary use is not
> that and the speculation portion should be only
> a small % of the traded volume.
>
> New tightened rules will be introduced when people
> open future accounts trading such derivatives so
> only a small portion of the net asset of the account
> holders is used for such speculation.
>
> The problem is - who is going to enforce such rules :)
>
> From what I see in Asia, only a few widely held stocks
> will have their future counterpart take off in
> trading volume ... all the rest will die due to
> ill liquidity. And interestingly, a lot of people
> relate anything that is directly stocks related as
> safer vehicle than those stuff related to "index" :)
>
> -Lawrence
>
>
> --- Gary Fritz <fritz@xxxxxxxx> wrote:
> > > That's right....I want to control $60k of
> > Microsoft for a measley
> > > $6k tie-up. Effectively: A $1 move = 17% return on
> > margin
> > >
> > > Anyone else ?
> >
> > Sure, lots of people -- back in 1929, when that was
> > the kind of
> > leverage you could use for regular stock purchases.
> > And that kind of
> > leverage had a lot to do with the unusual weather
> > (it's raining
> > traders) they had in New York that year...
> >
>
>
> =====
> Lawrence Chan http://www.tickquest.com
> Innovative Analytical Software for Trading Professionals
>
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