This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

How to Buy Stocks on the Cheap

NEW YORK ( TheStreet) -- What if I could show you a cheaper way to buy stocks? No, not through options.

As an investment-adviser representative for Kingsview Asset Management LLC, which is state registered, I am always on the lookout for alternative products that can help my clients achieve their investment objectives. One product that can be beneficial is single stock futures. By using this innovative, but largely unknown, product, investors can "refinance" their equity positions at a lower rate.

Single stock futures, or SSFs, are an alternative vehicle to invest and trade equity products. SSFs are futures contracts on individual equities, narrow-based indices or exchange traded funds, or ETFs. A single stock futures contract held through expiration results into either stock ownership for a long position or stock delivery for a short position. An advantage over a traditional options contract is that a SSF contract can't potentially become worthless -- unless the stock goes to zero.

These products are traded on OneChicago and regulated by the CFTC and SEC. Singe stock futures may be traded in either a securities or futures account. SSF contracts executed at OneChicago are cleared and settled by the OCC, formerly known as the Options Clearing Corp. As of this writing, OneChicago lists 2,969 products, including 479 ETFs.

So how does it work?

1 SSF contract = 100 shares of stock.

The futures price is determined by taking the stock price plus interest minus dividends.

Multiple expirations with the two front months as well as the next two quarterlies.

Expirations are the third Friday of the month and, if not a business day, on the preceding business day.

There is a 20% margin requirement. Users have the ability to post Treasuries, cash or equities as collateral for funding positions.

Think about that for a minute. Regulation T in a securities account requires a 50% margin deposit. With single stock futures, you only need to put up 20% -- that leaves a lot of capital that can be invested elsewhere. In addition, when you factor in the current broker's call rate for owning stocks on margin, this cheaper alternative lowers financing costs.

Want to short a hard-to-borrow stock? With single stock futures, there's no hassle. The futures contract may be sold just like a traditional futures contract, thus initiating a short position.

Here are some additional benefits of this product. It:

Acts as a synthetic stock loan or stock borrowing through exchange of futures for physical ("EFP") transactions.

Potentially reduces funding costs for long positions and potentially increases rebates on short positions.

Serves as an alternative to swap and equity option products.

Reduces working capital, thus increasing operating cash flow.

Improves balance sheet ratios (liquidity, debt and capital ratios).

Offers the ability to collateralize margin with assets other than cash.

Interest-rate prices are set by the open market rather than an individual counter-party.

Provides the ability to create a custom basket index.

This product is growing at a very high rate. I believe it can provide investors with some excellent alternatives in accomplishing their investment goals. Feel free to email me for additional details on this product or to discuss how it may fit into your current portfolio and investment strategy.

Futures and options trading is inherently risky and unsuitable for all investors. Past performance is not necessarily indicative of future results. Stop-loss orders intended to limit losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders.
Matt Zeman is a trader at Kingsview Financial. He began his trading career as a runner in the grain pits at the Chicago Board of Trade before becoming an arbitrage clerk. Eventually he started trading equity options and stocks. Matt now is a full-time futures broker. He has been a frequent guest on CNBC, Fox and Bloomberg, and provides his views on the stock, bond and futures markets for financial media including Dow Jones, the L.A. Times and The Associated Press. Matt is a member of the Chicago Board of Trade, and carries series 3, 7 and 66 licenses.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 1.64%
FB $117.43 -0.96%
GOOG $692.36 -0.84%
TSLA $232.32 -3.92%
YHOO $36.01 -1.42%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports