Replies to post #10552 on Short Term Trading Member Forum

[mr_cash4]

gary, the derivatives do NOT have an "underlying value of $ 0.00" (whatever that means). For example, in-the-money call (which is a derivative) CLEARLY does NOT have an underlying value of $ 0.00, as it represents ownership of 100 shares of that stock.

again, the question I posed to GGScott asked in a different way, how can the MSFT Single-Stock futures contract have an underlying value of $ 0.00, but MSFT stock does not???? that makes no sense whatsoever.

besides the fact that the derivatives are called so because they derive their value from the underlying stock, so whatever underlaying value is in that stock (again, whatever that means) is therefore also in the derivative.

[TL Trader]

I think Gary is right. Another way of looking at it might be that although shares in a company can be split or retired compared to futures there is a relatively fixed and finite number of outstanding shares or "float". Whereas with futures the number of contracts (open interest) fluctuates depending on who happens to be the buyer and seller for any given trade and at expiration the open interest of the futures contract in question goes to zero.
With stocks the shares are simply transfered from one owner to another at various prices. Theorectically unless a stocks share price goes to zero no one (Stock holders) necesarily has to loose. With futures there is absolutely a winner for every loser for every contract.