Resource Corner -
Book Talk
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by: Carrie Grabowski
As we are
near the actual launch of single stock futures, there were bound to be
books published on the subject, and Patrick Lafferty’s simply named
Single Stock Futures is the first we’ve seen. Given that SSFs are a new
product that links the market for individual stocks and futures for the
first time, there’s every reason to believe that there will be more
books of this type. The concept and applications for single stock futures
are at least as compelling as stock index futures, which set sail some 20
years ago and have become enormously successful for both institutional and
individual investors.
Single stock futures have had a fairly impressive early life at exchanges
both in both London and Spain, though they are traded in a number of
countries – ex-the U.S. – with marginal success. The anticipation of
their launch here in the U.S. has been meet with mixed reviews, but
that’s not unusual. All new products in their pre-introduction phase
meet with resistance, particularly from the brokerage community, that
wants assurances of success before they dive in. The same was true for
stock indexes when they were introduced, and look what’s happened there.
Actually, Lafferty has done a smart thing in his book. Because the futures
contract has not yet begun trading domestically – thus, leaving it only
to the imagination as to what the more complex applications might be in
the future – the author has given the basics of the product in just a
few of the 16 chapters, and these fundamentals are expressed really quite
simply. There’s no pretense that there’s more to say, and that’s
okay.
He has also realized that many of the eventual users of SSFs may never
have traded futures before, since stock traders dramatically outnumber
futures traders. So Lafferty gives them a mini-introduction to the most
important concepts. These include price forecasting, trends, technical
analysis, spread trading, options, electronic trading, and a moderate dose
of trading psychology.
The book does a very thorough job of walking the new or potential trader
through the stages of trading a single stock futures contract. Starting
with the nuts-and-bolts contract specifications for SSFs, then going on to
show economic comparisons of purchasing stocks versus futures and the
benefits of doing so, the book tracks easily. Short selling, spreads and
hedging also are handled capably, with the examples doing a fine job of
illustrating how to best use these contracts.
Lafferty sums it up this way. “No matter what type of investor you might
be, there is an opportunity for you to utilize single stock futures to
make yourself more successful. Whether you are a day trading speculator or
a conservative buy and hold type, these new contracts have the ability to
vastly improve your overall performance.”