Steven M. Sears
CME Group, which has long tried to attract stock and options investors, may finally find success.
The exchange giant has launched futures contracts on single stocks, a failed idea from 24 years ago that CME has cleverly updated and launched at a time when investors have an insatiable desire for derivatives, leverage, and aggressive speculation.
CME's single-stock futures are designed to let investors wager on 55 of the world's top stocks, which just happen to be among the stock and options markets' most actively-traded listings.
The standard contracts, which includes Apple, Meta Platforms, Micron, Nvidia and Palantir, represent 100 shares of stock, which is the same for listed options.
A futures contract lets investors buy or sell an associated asset at a certain time and price. Historically, futures contracts have been used to trade commodities, like oil and pork bellies, and financial measures like the S&P 500 index, and interest rates.
Futures are often considered simpler to trade than options contracts because the values essentially move in line with the underlying asset that they track. Options, which represent the right but not the obligation to buy or sell an asset, are more complicated and values are influenced by perceptions of volatility.
CME also is listing "micro-Single Stock Futures" on a subset of 22 stocks. These contracts represent 10 shares of the underlying stock, a singular innovation that should have wide appeal to retail investors who have emerged as one of the most active constituencies in the stock and options market. Smaller contracts are less expensive than larger contracts, which means that a little bit of money will go a long way.
One of the key appeals of futures contracts is margin rates. With many contracts, you can take, say, $100 to buy perhaps $1,000 worth of futures. That kind of leverage doesn't readily exist for stocks and options. Buyers of single-stock futures, however, will have to put down at least 15% of the notional value of the stock.
CME's single-stock futures launch also poses a threat to the options market, which was birthed by the futures market in 1973.
Since then, the futures industry has enviously watched the options market grow into one of the world's most active markets. CME, which owns many of the world's top futures exchanges, has tried to attract individual investor interest with mixed success.
Now, by tweaking contract specifications, extending trading hours, and doing away with the complexities of options, CME has launched its strongest challenge yet to the stock and options market.
The new stock futures will trade in a 23-hour market, Sunday to Friday, from 9:30 a.m. to 4 p.m. Eastern Time. The contracts are cash-settled, which means the contracts pay out in cash, unlike equity options, which settle into stock.
These new contract terms, combined with the fact that futures tend to be cheaper to trade than stocks and options, gives CME a fighting chance to attract sustained investor interest from the stock and options markets.
"The CME is hoping that individual investor affection for leveraged single stock plays will translate into a newfound love of single stock futures," says Steve Sosnick, Interactive Broker's chief strategist. "There's a clear fondness for single stock ETFs that offer leveraged exposure to shares, and this product creates another way, and perhaps a cleaner way, for investors to get a little more leverage on top of their favorite stocks."
Futures contracts multiply stock price moves on a one-for-one basis, and any leverage will magnify that. The payoffs could be very attractive for winning trades.
Already, many investors trade leveraged exchange-traded funds that use derivatives to enhance the return of associated stocks. Single-stock futures presumably offer a way to unpack those popular funds, which Sosnick says totals about $151 billion.
Single-stock futures were first introduced in 2002 on OneChicago, an electronic futures exchange, owned by CME, Cboe Holdings, and an Interactive Brokers' unit. The exchange never gained much success, and it closed in 2020. Since then, individual investors have undergone a metamorphosis that CME has clearly recognized.
Individual investors have emerged as a powerful force in the markets that is often likened to hedge funds in terms of approach and trading frequency. Unlike institutional investors, retail investors are more entrepreneurial. They can make decisions for themselves without going through the difficult reviews that defines institutional trading.
Moreover, retail investors have helped push options trading volumes to levels that were once hard to imagine. On Friday, for instance, some 76 million options contracts traded. When single-stock futures were first introduced, maybe a few million options contracts traded in a day.
If CME can attract 10% of the options industry's trading volumes, it should have enough liquidity to build a competitive market.
Still, there is work to be done, and once more CME seems to have taken a page from the options industry.
The futures exchange has joined with Charles Schwab, one of the largest online brokerage firms for individual investors, Ninja Trader and Plus500, online brokerage firms, to launch single-stock futures.
Importantly, Schwab is offering educational classes to teach clients how to trade stock futures, which was a powerful tool that the options industry used to grow the market into the powerhouse that it is today.
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(END) Dow Jones Newswires
July 27, 2026 13:35 ET (17:35 GMT)
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