Who Trades Equity Index Futures?
Equity index products are used by a wide range of industries and groups, including portfolio managers, endowments, asset managers, mutual and ETF funds, and self-directed traders. CME Group offers futures and options products on multiple equity indices to accommodate different market participant needs.
Portfolio managers (PMs) are responsible for creating and managing equity market risk for their clients. Equity Index futures lend themselves to a variety of risk management overlay strategies to either reduce risk or enhance returns. Some of these strategies may include:
Endowment, pension and mutual funds generally take a long-term investment view. They may focus a substantial part of their investments in equity markets to help achieve their long-term capital growth objectives.
Certain Equity Index futures strategies can be applied by risk managers to efficiently create a long equity position. This way, they can gain the equity market exposure they want, while only using a fraction of the capital. The remaining capital can be used for other investment opportunities.
Self-directed traders can use Equity Index futures to express a view on the overall equity market.
Rather than having to evaluate individual share values they can trade the entire index using the futures contract.
Peter Knight Advisor