3.2. Stock Index Futures

A stock index is a measure of the value of selected stocks on an exchange, used by investors to track the performance of a broad sector of the stock market and to benchmark the return on their investments. An index typically is valued at the weighted average of the value of the stocks comprising the index.

Investors began trading stock index futures contracts in 1982. They use them to protect stock portfolios from adverse swings in the market. For instance, an investor who has a large portfolio of stocks can sell stock futures contracts to protect against a fall in the market. Major stock index futures contracts include:

• • Dow Jones Industrial Average (DJIA)
• • S&P 500, a large cap index of 500 NYSE stocks
• • S&P MidCap 400, an index of 400 mid-sized NYSE stocks
• • Russell 2000, a small-cap index
• • NASDAQ 100, an index of the 100 largest non-financial stocks on the NASDAQ stock exchange

The contract specifications for three of these stock index futures are shown in the table below.

Specifications	DJIA	S&P 500	Russell 2000
Contract multiplier	$10	$250	$100
Tick size	1 point	0.10 point	0.10 point
Tick value	$10/contract	$25/contract	$10/contract
Delivery months	March, June, September, December
Last trading day	3rd Friday	Thursday before 3rd Friday	3rd Friday

Note the absence of a contract size. Unl