Dow futures are financial

futures Futures may mean: Finance *Futures contract, a tradable financial derivatives contract *Futures exchange, a financial market where futures contracts are traded *''Modern Trader'', formerly Futures, an American finance magazine Music * ''Futures' ...

which allow an investor to hedge with or speculate on the future value of various components of the

Dow Jones Industrial Average The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indice ...

market index. The futures instruments are derived from the

E-mini E-minis are futures contracts that represent a fraction of the value of standard futures. They are traded primarily on the Chicago Mercantile Exchange. As of April, 2011, CME lists 44 unique E-mini contracts, of which approximately 10 have average ...

Dow futures.

Derived futures

All of the Dow derived future contracts are a product of the

Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is an American derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board ...

(CME). They expire quarterly (March, June, September, and December), and are traded on the CME Globex exchange nearly 24 hours a day, from Sunday afternoon to Friday afternoon. *E-mini Dow futures (ticker: YM) contract's minimum tick is 1 index points = $5.00 While the performance bond requirements vary from broker to broker, the CME requires $3,550, and continuing equity of $3,200 to maintain the position.

Contracts

Dow futures contracts are commonly used for hedge or speculative financial goals. Dow futures contracts are used to hedge, or offset investment risk by commodity owners (i.e., farmers), or portfolios with undesirable risk exposure offset by the futures position.

Quotes

CME Group provides live feeds for Dow futures and these are published on various websites like Bloomberg.com,

CNN Money CNN Business (formerly CNN Money) is a financial news and information website, operated by CNN. The website was originally formed as a joint venture between CNN.com and Time Warner's '' Fortune'' and '' Money'' magazines. Since the spin-off of ...

, DowFutures.org.Dow Futures https://dowfutures.org

Trading leverage

Dow futures trade with a multiplier that inflates the value of the contract to add leverage to the trade. The multiplier for the Dow Jones is 5, essentially meaning that Dow futures are working on 5-1 leverage. If the Dow futures are trading at 10,000, a single futures contract would have a market value of $50,000. For every 1 point the Dow Jones Industrial Average fluctuates, the Dow futures contract will increase or decrease by $5. The result is that a trader who believed the market would rally could simply acquire Dow futures and make a huge amount of profit as a result of the leverage factor; if the market were to rise to 14,000, for instance, from the current 10,000, each Dow futures contract would gain $20,000 in value (4,000 point rise x 5 leverage factor = $20,000).

US tax advantages

In the United States, broad-based index futures receive special tax treatment under the IRS 60/40 rule. Stocks held longer than one year qualify for favorable capital gains tax treatment, while stocks held one year or less are taxed at ordinary income. However, proceeds from index futures contracts traded in the short term are taxed 60 percent at the favorable capital gains rate, and only 40 percent as ordinary income.Id., Section 1256(a)&(b)(1), https://www.law.cornell.edu/uscode/text/26/1256-/. Also, losses on NASDAQ futures can be carried back up to 3 years, and tax reporting is significantly simpler, as they qualify as Section

1256 Contract A 1256 Contract, as defined in section 1256 of the U.S. Internal Revenue Code, is any regulated futures contracts, foreign currency contracts, non- equity options (broad-based stock index options (including cash-settled ones), debt options, commo ...

References

External links

Chicago Mercantile Exchange (CME)

Dow Futures
{{stock market Futures markets Dow Jones Industrial Average