If I am a long-term investor, how can I maintain a position for more than the life of the futures contract?
While futures are often perceived as complex, the reality is that the principle of futures is quitestraightforward. SPI® futures are a powerful invest
ment tool, offering the trader some advantages over trading physical shares.
While the immediate SPI® contract has a definite life of up to three months, a medium or long-term investor is able to maintain a position by rolling over the contract. This simply involves closing the contract near to expiry and opening an equivalent contract in the next month.
Do I have to take delivery of any shares when the SPI® contract expires?
SPI® futures have a mandatory cash settlement, meaning that a position is held until the contract’s expiry, the contract is automatically closed and all profits or losses accrue at the closing price. The closing price is the All Ordinaries Index level on the expiry day as provided by the exchange. A trader therefore, does not take delivery of any shares but is debited or credited cash.
Am I able to exit a trade easily if I change my mind?
Having opened a SPI® contract, a trader is able to take advantage of the high volumes and liquidity in the futures market and close the trade immediately. Traders are therefore able to ‘day-trade’ the SPI® – that is, open and close a futures position within the same day.