Spot index trading is an investment opportunity that provides high and fast returns on low capital outlay. this is merely an investment on 'Financial Leverage Margin Trading'. Using small capital to participate in a big market. Trading in the Spot Index market is basically price forecasting on the movement of the prices of the index. You can make profits when the prices go up or down. [ Buy low - Sell high : Sell high - Buy low ].
A stock market index trading contract is a commitment to participate in the overall price movement of the stock market , as measured by the underlying stock index.
The spot index trading is traded for spot delivery. They are traded on security deposit, which serves as a performance bond, or good faith deposit to guarantee a participant's performance of contractual obligations. Both buyers and sellers are required to pay margin once they open a position.
Unlike commodity trading, spot index trading uses cash settlement. The contract is settled in cash subject to the spot - closing index of the stock market. Holders of long [ Buy ] or short [ Sell ] positions simply settle by crediting or debiting their account with the amount equal to the market spot index. This avoids stock delivery and thus eliminates transaction cost.
The value of a stock index trading contract equals the index value multiplied by a fixed amount. For the Hong Kong market index trading this fixed amount is ten US dollars ( USD 10.00 ). If the Hong Kong spot index is at 12000 points, then it's contract value is one hundred and twenty thousand US dollars ( USD 120,000.00 ).
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