Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / CME Single Stock Futures Open 23-Hour Trading for Retail Investors
Transcript
- Lucas: So the CME just launched single stock futures on a handful of names — SpaceX, Micron, a few others — and the headline is that you can trade them 23 hours a day, Monday through Friday. Luna: Right, 23-hour trading sounds exciting, but is this really for retail or is it more of an institutional product dressed up for the headlines? Lucas: Good question. The contracts are cash-settled, so no delivery of shares, and the minimum contract size varies — for SpaceX it's 100 shares, for Micron it's also 100 shares. That puts the notional value per contract for something like Micron around five to six thousand dollars. That's accessible to a lot of retail traders, but it's not micro. Luna: I mean, if these conversations help you think about your portfolio or a specific decision, honestly, if today was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. Lucas: It's a small way to keep the show ad-free and independent. So, back to the futures — the CME is positioning these as a way to hedge or speculate on single stocks outside regular hours, including earnings reactions, geopolitical news, whatever happens at 3 a.m. Luna: And that's where it gets interesting. We've seen the Nasdaq drop 3.5 percent in the last five days — a lot of that happened during regular hours, but what if you could have traded that move during the sell-off overnight? Lucas: Exactly. The VIX is sitting just under 19, up 9.5 percent over the same period. So volatility is rising, and these futures give you a tool to act on that volatility in specific names. But the flip side is obvious: 23-hour trading means you're always on the clock. Luna: Always on the clock can be dangerous. One bad news event at 2 a.m. and your position gets blown out before you even wake up. That's a real risk for retail traders who can't monitor screens all night. Lucas: And that's why I think the product is actually more suited for hedging than speculation for most people. Let's say you own a bunch of Micron stock and you're worried about an earnings miss — you could short the futures after hours when the report drops, rather than waiting for the next open. Luna: But aren't the futures themselves thinly traded at first? The CME only launched them this week. Liquidity might be an issue, which means wider spreads and slippage. Lucas: That's the main concern. The CME has designated market makers to provide two-sided quotes, but initial volume will likely be low. Over time, if adoption grows, it could become a standard tool. For now, it's an experiment. Luna: An experiment that comes at a time when the market is showing signs of rotation. The Nasdaq is down 3.5 percent in five days, but the NYSE composite is actually up 0.9 percent. That divergence suggests money is moving out of tech into other sectors. Lucas: And single stock futures could accelerate that rotation if speculators use them to short overvalued tech names and go long value stocks — though the initial list of available contracts is very tech-heavy: SpaceX, Micron, a couple of others. So it's skewed. Luna: Right, they picked the companies that generate the most media attention. But for an investor who wants to hedge a broad market downturn, options on the S&P 500 are still the better tool. Lucas: Absolutely. Single stock futures are a scalpel, not a sledgehammer. If you have a concentrated position in a name like Micron and you want to protect against a 10 percent drop without selling the shares — for tax reasons or whatever — this could be a clean hedge. Luna: And for long-term investors? Should they care about this product at all? Lucas: Probably not. If you're dollar-cost averaging into index funds, 23-hour single stock futures are irrelevant. But if you're a more active manager — or even a retail trader who follows earnings closely — it's worth understanding because it changes the landscape of after-hours price discovery. Luna: Price discovery that happens while most of us are asleep. That could lead to wider gaps at the open if the futures paint a different picture than the regular session. Lucas: Exactly. We already see gap opens based on news. Now that gap can be traded in real time, which might actually reduce the size of the gap — because the reaction happens overnight and gets absorbed into the futures price. So the open could be less violent. Luna: That's an optimistic take. The pessimistic one is that it encourages more leveraged speculation, more emotional trading, and eventually more blow-ups. Lucas: Both are possible. The CME is betting that the market wants more access. And with the VIX elevated and the Nasdaq correcting, the timing is interesting. It's a tool — it's not good or bad by itself. Luna: So the key takeaway: if you're an active trader with a specific need to hedge a single stock, look into these contracts. But for most of us, stick to the broad-based tools and keep an eye on how this experiment develops. Lucas: And if you do dip your toe in, start small. The liquidity won't be there on day one. Let the market makers find their footing. And never trade something you don't fully understand. Luna: Wise words. And if today's episode made you think about your own approach, that support link is still there — buy me a coffee dot com slash fexingo. Appreciate it. Lucas: Alright, that's our take on the CME's new single stock futures. Next time, we'll look at what the yield curve re-steepening means for bank stocks. Stay sharp.