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SET50 Index Futures

SET50 Index Futures

Futures are contracts that parties enter into either to buy or sell underlying assets in the future. The parties must adhere to terms of the contract. When entering into a SET50 Index Futures contract the prices for buying or selling will be fixed in order to deliver the underlying assets or arrange for a cash settlement in the future. On a date when both parties enter into a contract, they will agree on prices for buying and selling in the future, but there will be no settlement on that date. Delivery and settlement of the price for underlying assets will be done in the future when contract's maturity date arrives.
Advantages of SET50 Index Futures Trading
  • Easy to analyze
  • Buying futures is like buying underlying assets. The only requirement is to be able to analyze the future trend for the SET50 Index.

  • Speculating and short-selling possibilities
  • If you believe that the SET50 Index will rise, you can make a profit by taking a long position in the futures market. Conversely, if you believe the SET50 Index will fall you can make a profit by taking a short position in the futures market. Although you can take a short position in the futures market, it might not be possible to do so in the stock market because conditions for short-selling do not always exist.

  • Hedging
  • If you own a portfolio of stocks and believe that the market has risen too sharply over the past few weeks, and if you expect the index to fall, you can use futures trading as a hedging tool. By holding a short position in the futures market even if your stock portfolio shows a loss you can profit from your positions in the futures market.

Risks of Trading SET50 Index Futures
  • Monitor your portfolio
  • Investing in futures contracts involves money placed on margin only, and the amount invested is far less than the value of the underlying assets. If investors make profit then on a mark-to-market basis the margin will increase. Conversely, if investors make a loss on a mark-to-market basis the margin will be reduced. If the margin level is reduced to a maintenance margin then the investor will be required to add margin money (i.e. a call margin) until it reaches the level of the initial margin. Therefore, investors should monitor their margin and position closely.

  • A limited lifespan
  • SET50 Index futures contracts have a limited lifespan, so investors should take note of the maturity date.

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