Single stock futures (SSFs) are derivatives instruments that offer investors exposure to price movements on the underlying share. A futures contract is a legal agreement to buy or sell an underlying asset at a future price, called the exercise price, at a future date, called the expiry date. Contracts are predominantly physically settled (investors receive the underlying share); however, cash settled versions are also available.
What is the difference between a standard futures contract and a dividend neutral futures contract?
Our SSFs are available in both standard and dividend neutral forms.
Traditionally futures take out the implied dividends of the underlying share over the life of the contract. For example, if you wish to trade the share at a future date, the expected dividends over that period will be removed from the future price since you would not receive these when trading the share on that future date. Undeclared dividends are based on dividend assumptions which may prove to be incorrect. To remove this dividend risk, the JSE created dividend neutral SSFs, which remove this assumption risk. For more information on these contracts, please see the section on dividend derivatives.
JSE: This paragraph does not explain the difference between the standard and dividend neutral form. This is very unclear.
Who is this for?
SSFs offer investors the opportunity to enhance the performance of their equity portfolios, protect their investments against adverse price movements and cheaply diversify risk. Speculators hoping to make a profit on short term movements in the futures contract price, asset managers, hedge fund managers, arbitrageurs and retail investors seeking portfolio diversification and hedging opportunities in particular should consider this product. Market participants can go long or short as they see fit.
How to get it
To trade, register as a client with an authorised JSE Equity Derivatives member