INVESTMENT IDEAS
Before antigravity Internet stocks, there were futures. These volatile trading instruments - contracts to buy or sell stocks or commodities at some point down the line - have long given small, DIY investors the thrill of making (or losing) a bundle in a hurry, without venturing too much. Yet as good a fit as they might seem for hyperactive online traders, they haven't been popular on the Web. That's changing, however, thanks to some private brokerages and the Chicago Mercantile Exchange.
Back in 1997, the CME began offering online traders "mini" future contracts, basically a way of placing a wager on the index value of the S&P 500 or Nasdaq 100. CME's mini, or "e-mini," gets you a small piece of the action for a portion (20 percent) of the price you'd pay on a full contract - and lets you track it without going to the trading floor. So, for example, with a security deposit - or margin - of $3,400, you control an index value of $49,000 that includes companies like Microsoft, Yahoo!, Amazon, Sun, Dell, Intel, and the rest of the high-flying Nasdaq 100. You can trade the shares online in your mini portfolio on the CME or through various brokers, who charge $15 to $40 for trades. The contract lives for a specified period - at that period's end, the day of reckoning comes. You pocket any gains you've managed on those stocks; you pay for any losses.
As with Net stocks, futures can be like a ride on NASA's "vomit comet." Expect stomach-churning turns of information and rumor - and prepare to give the market constant attention. Combining Net stocks and futures could easily lead to ulcers, yet the potential payoffs are out of this world.
Only the CME makes minis available online, but it lets several brokers offer them. These include Lind-Waldock, Alaron Trading, and Infinity Brokerage Services. James Mooney, president of Infinity, is especially excited by the e-mini's prospects. "Internet futures," he says, "is becoming a real buzzword."
Alaron Trading: www.alaron.com.
Chicago Mercantile Exchange: www.cme.com.
Infinity Brokerage Services: www.infinitybrokerage.com.
Lind-Waldock: www.lind-waldock.com.
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