How Futures Trading Is Changing for Retail Investors

Last week, CME Group launching single stock futures with new contracts on Apple, Nvidia, Meta, Amazon, and 50 other major stocks.

And joining me to discuss this and more about the futures trading involving buying and selling standard legal contracts to buy and sell specific assets to a predetermined price on a set.

Future date and unlike options trading, a futures contract creates a strict legal obligation for both the buyer and the seller to execute the transaction when the contract expired.

So to discuss this and a little bit more is going to be our Toby McDaniel, president of Ninja Trader this morning.

Tobin, thank you so much for joining us today.

Thanks for having me.

You er gave a good overview of what's happening in the future space.

Yes, it's definitely interesting, definitely interested to talk a little bit more about this, but let's go ahead and start off with the macro backdrop.

In September, a rate hike isn't locked in, and odds could be swayed by the July jobs report tomorrow.

So what are the narratives surrounding the Fed that you are tracking at the moment?

We're tracking, when we track the broader market, we're looking at, you know, a market that's near all-time highs, but where you've not just got the narratives around the Fed, but also geopolitical risk.

The AAI capex cycle, you've got a market where, you know, the growth has been driven, driven by a smaller and smaller number of names, which means there's been a lot of volatility.

Now, that's something that creates a lot of unease for some investors, but creates opportunity for futures traders.

So, as we watch it and we look at what our traders are saying, they're seeing opportunity in the market right now as they can capitalize on sharp moves in prices.

So let's talk a little bit more and dive in into the market, Brett.

By the end of the year, the rest of the S&P is expected to drive earnings instead of the MAG 7.

So what are you seeing in regards to the trend?

Is it heading towards that way?

Uh, yeah, I'm not a great market prognosticator, but that's certainly the what we see in the data, and um what our traders see is the desire to trade into these individual names, but, but certainly the, the market and the Fed's decision in September is going to be something we're all watching and watching to see what sort of odds are priced in as we advance over the next month.

So let's go ahead and start breaking down futures trading.

Why are single stock futures, in your opinion, making a comeback now?

Binger stock futures exited the scene 20 years ago, and the time is right for the come a comeback.

Retail trading has boomed.

It wasn't just a COVID era fad.

Retail trading grows and grows.

You know, even with the volatility of the last year, we've seen options and futures trading across the industry hit record levels.

And as more of these traders come in, they don't want to trade just commodities and indices, they've been asking for individual names.

So the market is ripe for the ability to trade these 55 different names that now have futures, whether it's Nvidia, Amazon, or any of the other big stocks that traders want to follow and want to move on.

Um, the market is is ready for it in a way it wasn't a couple days, a couple decades ago.

So, so Tobin, let me get your thoughts on this.

So why do you think products like single stock futures could actually represent the next future of retail trading specifically?

As retail traders have grown, and as the audience of traders has gotten younger, which it undeniably has over the last 5 years.

Traders have demanded better technology, better selection in products, and, you know, as they've gotten comfortable trading the names they like in options, um, they haven't been able to hear.

And so, I think we'll continue to see demand for greater selection.

These 1st 55 names in in single stock futures, probably just the start, as traders move forward and start to place trades and, and enact their strategies.

In in companies they can follow specifically, in companies they can follow 24/7, and in an instrument they can trade 24/7.

So Tobin, I want to get your thoughts on a couple of different things.

So tell us, what do you think the influx of younger traders specifically mean for the market participation, the volatility, and for investor behavior because we have been seeing, you know, an ongoing trend and just the market moving at a pace that it hasn't moved in the past.

Yeah, the, the market certainly moves faster and faster.

Um, it, it sort of draws down and recovers faster and faster.

I don't think that's necessarily driven by retail.

I mean, retail is a, is, is a much bigger group than it was, but I think the retail trader is just capitalizing on the nature of the market that now moves faster.

News gets ingested faster by institutions and by individuals.

People are able to trade faster, and so I think this is retail riding the wave versus creating the wave itself, uh, but they certainly are trying to capture, um, the moment in, in trading and capture that speed that we see, uh, in market changes.

Austan Tobin, well, thank you so much for joining us.

Definitely appreciate your time.

Uh, and really quick, one last question in regards to, you know, the market, the volatility, uh, what is your overall outlook for the rest of the year?

You know, I think we are in, uh, as I mentioned at the beginning, we're in a, in a market right now where there's just several different factors that are, that in and of themselves could drive volatility, whether it's geopolitical risk, this AI capex cycle.

That uncertainty, um, volatility seems like it's, it's been here all year, and it's gonna be here to stay through the rest of the year, uh, at least until a couple of those factors subside.

Awesome.

Well, Tilman, thank you so much for joining us.

Definitely appreciate your outlook and your time today.

Thank you.