The S&P/ASX 200 is a market capitalisation-weighted index, meaning its constituents are ranked relative to their total market value - share price multiplied by total tradable shares - and is a list of all stocks traded on Standard & Poor's Australian Securities Exchange.
Launched in March 2000, eligibility for entry on to the S&P/ASX 200 is based on three factors: market capitalisation, liquidity and listing. All trading volumes must exceed 0.025 per cent of the total eligible securities' trading volume, stocks must be listed on the Australian Stock Exchange and any strategic shareholdings greater than five per cent are excluded from the relevant float.
Trading is capped at 15 per cent for value, volume and transactions to ensure no one stock can dominate the index.
Stocks presently listed on the index include financial services providers Henderson Group, HFA Holdings and Insurance Australia Group, consumer staples company Coca-Cola Amatil, energy firm Australian Worldwide Exploration, utilities provider Spark Infrastructure and many more.
Futures contracts are an agreement between investors to pay a certain sum at a certain time in the future - the delivery date - on an asset of standardised quantity and quality.
They act to minimise risk for both parties, ensuring that when each put in an initial stake in the investment, daily market trading and the changing price of the commodity results in monies being shifted from one party to another to keep up with daily profits and losses.
At the end of the contract, the amount exchanged is therefore not the initially price agreed upon but the 'spot price' - as any gain or loss has already been exchanged between the contract holders.
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