A stock futures contract is a commitment to buy or sell the financial exposure equivalent to a specific amount (contract multiplier) of shares of the underlying stock at a predetermined price (contracted price) on a specified future date.

As stock futures contracts are cash settled, there is no physical delivery of shares when the contract expires.

Upon expiry, profits and losses are credited or debited to the account of the contract buyers/sellers in an amount equal to the difference between the contracted price and the final settlement price multiplied by the contract multiplier.

The final settlement price is the average of the midpoints of the best bid and offer prices for the underlying stock as quoted on The Stock Exchange of Hong Kong, taken at five-minute intervals during the last trading day.

To offset an open short stock futures position before expiry, a seller of a stock futures contract simply buys back the contract while a buyer sells a stock futures contract to close the open long position.

All buyers and sellers of stock futures are required to post margin when opening a position in the market to ensure performance of the contractual obligations. If the margin falls below the stipulated level due to adverse price movements, the investor will be called upon to promptly restore the margin back to the original level.

The above information is subject to change upon market condition.

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