Individual Stock Futures Quick Guide: Understand Margin, Fees, and Practical Strategies in One Go

What are single-stock futures? Why are they so popular?

Stock futures are essentially standardized contracts with individual stocks as the underlying asset, allowing you to buy or sell stocks at a predetermined price. Their price movements closely track the spot stock, and they can even serve as a reference for the stock’s future trend—if futures prices are higher than the stock, it indicates market optimism; if lower, market pessimism.

Core feature: 1 lot of individual stock futures = 2 shares of stock (2000 shares), with a much lower investment threshold than directly buying stocks.

Are individual stock futures really more cost-effective than stocks? Let’s look at the pros and cons first

Three main attractions

1. Significantly lower transaction costs than spot stocks
For example, in Taiwan stocks, buying 1 lot costs about NT$570 in commission, but 1 lot of individual stock futures only costs NT$10~20. The trading tax is even more impressive—selling stocks incurs a 0.3% tax, while futures are only 0.02%, equivalent to 1% of the stock tax burden. High-frequency traders must choose this.

2. No threshold for short selling
Stock margin trading has forced buy-back risks, but futures do not. As long as you close the position within the contract period, shorting is much more flexible.

3. Tax advantages are unbeatable
Stock investors receiving dividends must pay National Health Insurance + dividend tax, with high-income groups facing up to 30%. But for futures investors, dividends are directly returned as margin, completely avoiding these two taxes, making it especially friendly for high-income earners.

Four major risks to be aware of in advance

1. Liquidity may be insufficient
Individual stock futures often have lower trading volume than the underlying stocks, especially for less popular stocks, leading to large bid-ask spreads. Sometimes, you can’t find a counterparty to close your position.

2. Margin calls can be deadly
Trading with only about 5~10% margin, leverage is extremely high. If losses exceed the maintenance margin, brokers will demand additional funds. If you can’t meet the margin call, your position will be forcibly liquidated without warning.

3. Leverage is a double-edged sword
Profits can be magnified tenfold or even a hundredfold, but so can losses. A single misjudgment can wipe out your capital, so strict stop-loss measures are essential.

4. Cost of rolling over at expiration
Futures have expiration dates; holding long-term requires continuous rollover. During the rollover process, you may profit or lose, which is an invisible cost for position holders.

Conclusion: Individual stock futures are most suitable for short-term traders and high-frequency operators. Investors with large capital should carefully consider liquidity issues.

Complete guide to margin requirements for individual stock futures

Futures margin is divided into three types:

Initial Margin — The amount required to open a position

Maintenance Margin — The minimum balance to keep the position; if it falls below, a margin call occurs

Settlement Margin — Additional reserve collected by the exchange to prevent default

When losses cause the margin to fall below the maintenance level, brokers will require you to top up to the initial margin. If it drops below 25% of the initial margin, your position will be forcibly liquidated with no room for negotiation.

How is the margin calculated for Taiwan stock futures?

The Taiwan Futures Exchange sets three margin tiers based on stock volatility:

Taking TSMC as an example, at a stock price of NT$400:

• Initial Margin = 400 × 2000 × 13.5% = NT$108,000
• Maintenance Margin = 400 × 2000 × 10.35% = NT$82,800

If the stock price drops below NT$387.4, the margin will fall below the maintenance level, triggering a margin call immediately. To avoid a forced liquidation, increase the margin ratio or reduce leverage when opening the position.

Margin requirements for US stock futures are similar, with initial and maintenance margins both at 20% of the contract value, but holding offset positions may reduce this requirement.

How much does individual stock futures cost? A list of fees

Commission — Varies by broker; larger trading volume can negotiate better rates

Trading tax — 0.02% in Taiwan

Slippage costs — Market volatility causes execution prices to deviate from expected prices, especially in fast-moving markets

Cost near expiration — As expiration approaches, higher margin requirements and premium/discount costs may apply

These costs can add up more than you expect. Be sure to calculate thoroughly before making large trades.

Six essential tips for practical trading

1. Not all stocks have futures — Confirm if the underlying asset has a corresponding contract before investing

2. T+0 trading for individual stock futures — Can be day-traded or sold first then bought back, but prices must closely follow the spot trend

3. Lower trading volume than spot — Less popular stocks have larger bid-ask spreads, and trading may not meet expectations

4. Differentiate near-month and far-month contracts

   • Near-month: higher trading volume but approaching expiration
   • Far-month: less active but involves rollover costs

5. Order size and price linkage

   • Under NT$10: 0.01 NT$
   • NT$10~50: 0.05 NT$
   • NT$50~100: 0.1 NT$
   • NT$100~500: 0.5 NT$
   • NT$500~1000: 1 NT$
   • Above NT$1000: 5 NT$

6. Small futures designed for limited capital — 1 lot = 100 shares, mainly targeting high-priced stocks, allowing participation with less capital

How to trade individual stock futures without getting wiped out?

Step 1: Strictly control leverage

With 10x leverage, a 1% market move causes a 10% account fluctuation. A market reversal can quickly deplete your margin, leaving no room for recovery. Beginners should practice with small leverage.

Step 2: Set stop-loss and take-profit orders

Stock losses can be tolerated, but not in futures. T+0 trading and the risk of forced liquidation mean you must cut losses immediately when the market moves against you. Set stop-loss levels at acceptable prices; don’t rely on luck.

Step 3: Precisely judge entry and exit points

Stock investing can diversify and dollar-cost average over time. Futures require short cycles, rapid price changes, and periodic settlement, so accurate timing is crucial. Better to take smaller profits than risk high losses from being caught in a squeeze.

Trading hours for Taiwan and US stock futures

Taiwan stock futures:

• Regular hours: 08:45-13:45
• After-hours: 15:00-05:00
• Last trading day of the expiration month: close 15 minutes early (end at 13:30)

US stock futures:

• From 06:00 Taipei time to 05:00 next day, 24-hour continuous trading with no breaks

Conclusion: Individual stock futures are high-leverage games, traders must know

Core advantages of individual stock futures: low cost, high leverage, tax-friendly, flexible both ways.

But these benefits come with high risks. Every loss can be amplified by leverage, and rollover costs add up at expiration.

Essentially, individual stock futures are financial tools for predicting market direction, relying on correct judgment and strict risk management. There’s no perfect trading method—only strategies suited to your risk tolerance.

Remember: Using any leveraged product requires setting stop-loss and take-profit orders. This is not advice, but a survival rule.