Dict of Econ n meaning of S&P FUT
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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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Read more: What do the S&P, Dow and Nasdaq futures contracts represent? http://www.investopedia.com/ask/answers/146.asp#ixzz4mksakcIc
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Read more: What do the S&P, Dow and Nasdaq futures contracts represent? http://www.investopedia.com/ask/answers/146.asp#ixzz4mksakcIc
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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 ]]
Read more: Equity Market http://www.investopedia.com/terms/e/equitymarket.asp#ixzz4mky0SG1i
General source: http://www.investopedia.com/ask/answers/146.asp?lgl=rira-baseline-vertical
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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
( see: What is the difference between a 'financial system' and a
'monetary ... at https://www.quora.com/What-is-the-difference-between-a-financial-system-and-a-monet ...)
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
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.
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.
www.investopedia.com/articles/investing/.../fiscal-vs-monetary-policy-pros-cons.asp OR
SEARCH FOR: Is
raising interest rates a monetary or fiscal policy?
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.
SEE ALSO: FOMC: How Monetary Policy Works | In Plain English | St. Louis
Fed
https://www.stlouisfed.org/in-plain-english/how-monetary-policy-works
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.
SEE ALSO The Growing Importance of Monetary Policy - ThoughtCo https://www.thoughtco.com/the-growing-importance-of-monetary-policy-1147752
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.
SEE ALSO Contractionary Policy - Investopedia www.investopedia.com/terms/c/contractionary-policy.asp Search
for: What
is a contractionary monetary policy?
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
SEE ALSO What are some examples of expansionary monetary policy ... www.investopedia.com/ask/.../what-are-some-examples-expansionary-monetary-policy.a...
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.
SEE ALSO Fiscal Policy and Economic Growth: Government's Unique
Situation https://www.infoplease.com/.../fiscal-policy-and-economic-growth-governments-unique
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.
SEE ALSO Fiscal Policy: The Concise
Encyclopedia of Economics | Library of ... www.econlib.org/library/Enc/FiscalPolicy.html
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.
SEE ALSO Interaction between monetary and fiscal policies - Wikipedia https://en.wikipedia.org/wiki/Interaction_between_monetary_and_fiscal_policies
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.
SEE ALSO The Impact of Monetary Policy on Aggregate Demand, Prices, and
...
https://www.boundless.com/...policy...policies.../the-impact-of-monetary-policy-on-aggr..
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