domingo, 16 de julio de 2017

Dict of Econ n meaning of S&P FUT



Dict of Econ n meaning of S&P FUT
Dictionary of Economics
Search 1:  meaning of vix in economic dictionary
Economics A-Z terms beginning with A | The Economist  It was strongly opposed to Marxism
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It covers all aspects of economics including economic theory, applied microeconomics and macroeconomics, labour economics, public economics and public finance, monetary economics, environmental economics, and many others.
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A comprehensive financial dictionary with over 13000 terms and counting. ... An economic term to describe the inputs that are used in the production of goods or ..
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Nov 26, 2013 - Handy definitions of financial and economic jargon - from libor and quantitave easing to black swans and dead cat bounces.
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www.conferenceboard.ca  › Research Topics › Economic Performance and Trendsaggregate demand: The total demand for final (or “end-use”) goods and services within an economy. It makes up the national income of an economy 
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Search 1 meaning of S&P FUT in economic dictionary

S&P 500 futures are a type of capital asset contract that provides a buyer the right to a predetermined selection of stocks and on a predetermined future date listed on the S&P 500 stock market index. There are different sizes of stock baskets for the S&P 500; the Chicago Mercantile Exchange, or CME, offers a "big contract" and an "e-mini" contract.

The big
futures contract was originally priced by multiplying the quoted futures price by $500. For example, if the S&P was trading at $800, the value of the big contract was $400,000, or $500 x $800. Eventually, the CME cut the contract multiplier in half to $250 times the price of the futures index.

E-mini futures are one-tenth the value of the big contract. If the S&P 500 futures price is $800, this results in an e-mini being valued at $40,000. The "e" in e-mini stands for electronic.
Like with all futures, investors are only required to front a fraction of the contract value to take a position. This represents the margin on the futures contract. These margins are not the same as margins for stock trading; futures margins show "skin in the game," which must be offset or settled

Cash Settlement of S&P 500 Futures
Industry experts created the cash settlement mechanism to resolve the massive logistical challenges presented by delivering the actual 500 stocks associated with a futures contract. Not only would the stocks have to be negotiated and transferred between holders, but they would have to be properly weighted to match their representation in the index. Instead, an investor picks a long or short position, which is then subject to a mark-to-market; the investor pays any losses or receives profits each day in cash. Eventually, the contract expires, or is offset, and becomes cash settled based on the spot value of the S&P 500 index.

Instant Portfolio Diversification
One of the oft-proclaimed benefits of trading S&P 500 futures is each contract represents an immediate indirect investment into 500 different stocks. This, like all diversification, helps mitigate exposure to unsystematic risk.
There is a downside as well; the S&P 500 tracks very well with systematic fluctuations. Investors cannot rely on the S&P 500 futures contract to hedge (protect) most other equities. Additionally, these futures run the risk of over-diversification. Investors looking to beat the market average are ill-advised to rely heavily on market index instruments.
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Futures contracts are marked to market, meaning the change in value

Every morning before North American stock exchanges begin trading, TV programs and websites providing financial information will give the quotes for the S&P, Dow and Nasdaq futures contract. The quoted price movements of the futures contracts in early trading is used by some traders as a gauge for how the overall exchanges will perform at market open and over the trading day. If the index future is trading higher before the market opens, it generally means that the actual index will trade up in the early part of the day. This is because the index futures are closely tied to the actual indexes. These futures contracts mirror the underlying index and act as a precursor of the actual exchange index's direction.

A futures contract represents a legally binding agreement between two parties to pay or receive the difference between the predicted underlying price set when entering into the contract and the actual price of the underlying when the contract expires. Index futures trade with a multiplier that inflates the value of the contract to add leverage to the trade. The multiplier for the Dow is 10, for the Nasdaq it is 100 and it is 250 for the S&P.
[[ leverage to the trade:  What is 'Leverage'  Leverage is the investment strategy of using borrowed money: specifically, the use of various financial instruments or borrowed capital to increase the potential return of an investment. Leverage can also refer to the amount of debt used to finance assets. When one refers to something (a company, a property or an investment) as "highly leveraged," it means that item has more debt than equity.

The Difference Between Leverage and Margin
Although interconnected – since both involve borrowing leverage and margin are not the same. Leverage refers to the act of taking on debt. Margin is a form of debt or borrowed money that is used to invest in other financial instruments. A margin account allows you to borrow money from a broker for a fixed interest rate to purchase securities, options or futures contracts in the anticipation of receiving substantially high returns.  In short, you can use margin to create leverage. How Does Leverage Work?  OPEN: http://www.investopedia.com/terms/l/leverage.asp   ]]
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Continue futures contract: last sentence “The multiplier for the Dow is 10, for the Nasdaq it is 100 and it is 250 for the S&P.

For example, if a Dow Jones Index future is trading at 10,000, this means that if an investor purchased one futures contract, it would be worth $100,000. What this really means for the investor is that every one-point change in the Dow will cause a $10 change in real terms for the investor. If the Dow falls 100 points, the holder of the contract on the long side will lose $1,000.
Futures contracts are marked to market, meaning the change in value to the investor is shown in the investor's account at the end of each trading day until expiration. If the Dow falls 100 points in one trading day, at the end of the day, $1,000 will be taken out of the futures contract purchaser's account and placed into the seller's account. Because the index and the futures contract are so closely related both in price movement and value change, index futures are used to gauge the direction of the market.
For example, when the futures contracts on the S&P 500 trade higher, it means futures investors believe the actual exchange index will also trade higher once the markets open. DJIA futures contracts begin trading on CBT the Chicago Board of Trade at 8:20am EST, just over an hour before the stock market opens for trading. The S&P 500 and Nasdaq 100 futures both open at 8:30am EST and trade on the Chicago Mercantile Exchange.

Major events and breaking news can occur during this one-hour window before the stock market opens; this news usually gets priced into the futures contracts, fluctuating like a normal index. This allows investors to use the futures prices to get a generalized view of market sentiment, and may help to position certain trading strategies before equity markets open.
[[What is the 'Equity Market'  The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and [to]investors a slice of ownership in a company with the potential to realize gains based on its future performance ]]

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According to TheStreet  S&P 500 futures contracts give buyers the right to a basket of the stocks in the S&P 500 on expiration date (4 times a year) . Priced at 250 times the index, they're used mostly by institutional investors.

A lot of stock trading is based on what is deemed "fair value" for the S&P 500 futures. Trading in the S&P 500 futures goes on in Chicago for a half hour past the New York close. Even after the Chicago close, the futures continue to trade, albeit thinly, in after-hours CME Globex trading. If, in the morning, the futures are trading much higher than the cash S&P 500, institutions will sell the futures and buy the underlying stocks, giving stocks a boost at the open. If, on the other hand, the futures aren't trading much higher than the S&P 500's close, stocks can go down.
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FANG STOCKS
FANG is the acronym for four high performing technology stocks in the market as of 2017 – Facebook, Amazon, Netflix, and Google (now Alphabet, Inc.).
The four stocks – Facebook, Amazon, Netflix, and Alphabet – all trade on the NASDAQ, which measures the performance of over 3,000 tech and growth stocks that are considered a reflection of the economy and capital market.

The
S&P 500, which is based on the market capitalization of the 500 largest stocks listed on the NYSE and NASDAQ including FANG stocks, is considered the best representation of the US market. As of June 8th 2017, while the NASDAQ 100 was up 20% and the S&P 500 was up 8.5% year-to-date, FANGs were up more than 3x that of the latter. Year-to-date Facebook (FB) was up 33%, Amazon (AMZN) 34%, Netflix (NFLX) 33%, and Alphabet’s Google (GOOG) 26%, beating returns of both indices.
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FOMC board
Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors, which has seven members, and five Reserve Bank presidents.

2017 Committee Members
  • Janet L. Yellen, Board of Governors, Chair.
  • William C. Dudley, New York, Vice Chairman.
  • Lael Brainard, Board of Governors.
  • Charles L. Evans, Chicago.
  • Stanley Fischer, Board of Governors.
  • Patrick Harker, Philadelphia.
  • Robert S. Kaplan, Dallas.
  • Neel Kashkari, Minneapolis.
What is the role of the Federal Open Market Committee?
One of the primary tools used by the Federal Reserve (the Fed) to conduct monetary policy is open market operations: the buying and selling of federal government bonds in order to influence the money supply and interest rate. These operations are the primary responsibility of the Federal Open Market Committee (FOMC).
Who elects the chairman of the Federal Reserve?
Traditionally, the Board of Governors elected the Chairman of the Fed Reserve and the president of the Federal Reserve Bank of New York is elected Vice Chairman. The FOMC is composed of the seven members of the Board of Governors (note: board is appointed by the US president) and five Reserve Bank presidents.
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Difference between financial & monetary policies  OJO

Monetary variables are the interest rate, deposit rate, inflation rate, etc. The financial system consists of institutions which partake in the transaction of money for investment and speculative reasons. ... Thus, ‘a badly performing monetary system reflects as a badly performing financial system’.  OJO

The monetary system is the system that manages and facilitates the provision/printing, flow and circulation of money and credit. Monetary institutions are therefore the central bank (which facilitates money provision and manages circulation) and banks (which facilitate the provision of credit). Monetary variables are the interest rate, deposit rate, inflation rate, etc.

The financial system consists of institutions which partake in the transaction of money for investment and speculative reasons. Money provided by the monetary system is used in the financial system to  1-buy and sell financial securities in the capital market (e.g. stocks, government and corporate bonds) 2- [facilitate] the money market (e.g. certificates of deposit and treasury bills), and
3- [make] alternative investment securities (e.g. Mutual funds and real estate).
Institutions that operate within the financial system are insurance companies, stockbrokers, pension funds, mutual funds, hedge funds, etc.
Financial variables are  bond yields, stock prices, futures prices, etc. 

The performance and trend of the financial system is tracked by observing financial variables such as those enumerated above:  bond yields, stock prices, futures prices, etc.  While the performance and trend of the monetary system is tracked by observing monetary variables :  interest rate, deposit rate, inflation rate, etc..  OJO

This century, the monetary system and the financial system have merged to move together very closely. The monetary system provides funds in the form of credit for participants in the financial system to invest and speculate with. Thus, a badly performing monetary system reflects as a badly performing financial system. A badly performing financial system prompts the participants of the monetary system to take action to lift up the financial system. This is because the financial system is a very large component of the entire economy, and what happens in the financial system affects the real economy.
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People also ask
What is the fiscal and monetary policy? 
Monetary policy is a term used to refer to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. ... Fiscal policy is a broad term used to refer to the tax and spending policies of the federal government.
[Monetary variables are the interest rate, deposit rate, inflation rate, etc. The financial system consists of institutions which partake in the transaction of money for investment and speculative reasons. ... Thus, a badly performing monetary system reflects as a badly performing financial system.]
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What is the difference between monetary policy and fiscal policy?  Monetary policy is typically implemented by a central bank, while fiscal policy decisions are set by the national government. However, both monetary and fiscal policy may be used to influence the performance of the economy in the short run
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What are the different types of monetary policy?  Broadly, there are two types of monetary policy, expansionary and contractionary. Expansionary monetary policy increases the money supply in order to lower unemployment, boost private-sector borrowing and consumer spending, and stimulate economic growth.
What is the definition of monetary policy? 
Monetary policy is the process by which the monetary authority of a country, like the central bank or currency board, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

What is the definition of fiscal policy?
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply.

What is the difference between contractionary fiscal policy and expansionary fiscal policy?
The contractionary fiscal policy is used to check inflation. Similarly, if the government reduces tax or increases government expenditure then the aggregate demand in the economy is increased which is known as expansionary fiscal policyand is used during the time of recession.

How does monetary and fiscal policy affect the economy?
Fiscal policy is a government's decisions regarding spending and taxing. If a government wants to stimulate growth in the economy, it will increase spending for goods and services. This will increase demand for goods and services. ... A decrease in government spending will decrease overall demand in the economy.

How can expansionary and contractionary tax policies be used to manage the economy? 
These policies are mainly used to maintain economic activity or boost it during a downturn. Contractionary fiscal policies on the other hand are used to slow down aneconomy by measures such as increasing taxes and decreasing government spending. One main reason to use this type of policy is to control inflation.

How do interest rates affect fiscal policy?
This value is often used as a measure of economic well-being or growth. Fiscal policy affects aggregate demand through changes in government spending and taxation. ... Monetary policy impacts the money supply in an economy, which influences interest rates and the inflation rate.


Is raising interest rates a monetary or fiscal policy?
Fiscal policy is used to refer to the tax and spending policies of a nation's government. A tight, or restrictive fiscal policy includes raising taxes and cutting back on federal spending. A loose or expansionary fiscal policy is just the opposite and is used to encourage economic growth.

What are the tools of monetary policy and how do they work? 
The Fed can use three tools to achieve its monetary policy goals: the discount rate, reserve requirements, and open market operations. All three affect the amount of funds in the banking system. The discount rate is the interest rate Reserve Banks charge commercial banks for short-term loans.

What are the basics of monetary policy?
The term "monetary policy" refers to what the Federal Reserve, the nation's central bank, does to influence the amount of money and credit in the U.S. economy. ... Test your knowledge about monetary policy through this quiz. Additional quizzes are also available.

Why is the monetary policy important?
There is a limit to how much monetary policy can do to help the economy during a period of severe economic decline, such as the United States encountered during the 1930s. The monetary policy remedy to economic decline is to increase the amount of money in circulation, thereby cutting interest rates.
What is a contractionary monetary policy?
Contractionary monetary policy slows the rate of growth in the money supply or outright decreases the money supply in order to control inflation; while sometimes necessary, contractionary monetary policy can slow economic growth, increase unemployment and depress borrowing and spending by consumers and businesses.

How does the monetary policy works?
Through its monetary policy, a central bank can affect the demand in the economy, but it has no power to affect the supply. When growth falls, the central bank may reduce the repo rate. As this monetary signal works its way through the economy, the rates for all sorts of loans fall.

Which is an example of a monetary policy?
Examples of expansionary monetary policy are decreases in the discount rate, purchases of government securities and reductions in the reserve ratio. All of these options have the same purpose – to expand the country's money supply

How can the government use fiscal policy to promote economic growth?
The tax increase lowers demand by lowering disposable income. ... When the government decreases taxes, disposable income increases. That translates to higher demand (spending) and increased production (GDP). So, the fiscal policy prescription for a sluggish economy and high unemployment is lower taxes.

What are the primary fiscal policies?
Fiscal Policy. Fiscal policy is the use of government spending and taxation to influence the economy. ... The primary economic impact of any change in the government budget is felt by particular groups—a tax cut for families with children, for example, raises their disposable income.

What is an expansionary fiscal policy?
An expansionary policy is a macroeconomic policy that seeks to expand the money supply to encourage economic growth or combat inflationary price increases. One form of expansionary policy is fiscal policy, which comes in the form of tax cuts, transfer payments, rebates and increased government spending.

What is the purpose of contractionary fiscal policy?
Contractionary fiscal policy is a form of fiscal policy that involves increasing taxes, decreasing government expenditures or both in order to fight inflationary pressures. Due to an increase in taxes, households have less disposal income to spend. Lower disposal income decreases consumption.
SEE ALSO  Contractionary Fiscal Policy | Definition | Example - XplainD  xplaind.com/477870/contractionary-fiscal-policy OR SEARCH FOR  What is the purpose of contractionary fiscal policy?

What are the two goals of fiscal and monetary policy?
Fiscal policy and monetary policy are the two tools used by the state to achieve its macroeconomic objectives. While for many countries the main objective of fiscal policy is to increase the aggregate output of the economy, the main objective of the monetary policies is to control the interest and inflation rates.

How does monetary policy affect interest rates and aggregate demand?
Aggregate demand (AD) is the sum of consumer spending, government spending, investment, and net exports. The AD curve assumes that money supply is fixed. ... Increased money supply causes reduction in interest rates and further spending and therefore an increase in AD.

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