Equity index futures are derivatives that give investors exposure to the price movements of an underlying index. This allows market participants to profit from a basket of equities without trading the individual constituents.
An index futures contract gives investors the ability to buy or sell an underlying listed financial instrument at a fixed price on a future date. These products are cash settled and easily accessible via JSE Equity Derivatives members. The JSE also lists options on equity index futures.
This is not a complete list and is merely a representation of the JSE’s product offering.
- JSE Indices (FTSE/JSE indices)
- BRICS Indices
- MSCI Indices
- Various ETFs Tracking International Indices (IDX)
What is the difference between a standard futures contract and a dividend neutral futures contract?
Some of our index products are available in both standard and dividend neutral form.
Traditionally futures take out the implied dividends of the underlying over the life of the contract. For example, if we agree to trade the index at some future date, we would take all the expected dividends over that period out of the future price since we would not receive these when trading the index on that future date. Undeclared dividends are based on dividend assumptions which may prove to be incorrect. To remove this dividend risk the JSE has created dividend neutral index futures which removes this assumption risk. For more information on these contracts, please see the section on Dividend Derivatives
Who is this for?
This product is suited to both professional and private investors who want to gain exposure to basket of listed companies without purchasing individual shares or Single Stock Futures. When trading in Equity Index Futures, market participants can either buy long or sell short. The products are traded by speculators hoping to make a profit on short-term movements and investors seeking to hedge or diversify their portfolios.
- Gearing provides a capital efficient way to gain exposure to basket of shares. This creates greater volatility which amplifies gains and losses
- Incurs lower brokerage fees than actually trading in the underlying shares
- Allows investors to take advantage of price movements in the underlying index
- Liquid and easily traded
- Allows for Portfolio diversification
- Provides short selling opportunities to benefit from downward price movements.
- In the case of derivatives, you have no voting rights or any other ownership rights that would traditionally fall to a holder of the underlying equity
- Cash settled at maturity