Options Forum: A Quick Course on Futures

There's nothing quite like the feeling of waking up, all bright and eager, and getting the first news of the day: "S&P 500 futures are down 18 points in overnight trading, and Nasdaq futures are lower by 60. It looks like Wall Street is in for a rough opening."

What!? Whose idea was this, and exactly where did those numbers come from, anyway? More importantly, who is out there buying or selling stock index futures well in advance of the official market openings, and why are they doing so?

These premarket futures trades, as we shall see, reflect market sentiment, provide both offensive and defensive trading opportunities, and allow institutional investors to manage their performance relative to their benchmark. They provide a snapshot of market sentiment on the exchange opening, but have little further forecast content.

Touching The Basis

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