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Introduction: In April 1982, the Chicago Mercantile Exchange (CME) began trading in futures contract based on the Standard and Poor's Index of 500 common stocks. The introduction of both contracts was successful, especially the S&P 500 futures contract, adopted by most institutional investors. Stock index futures are traded in terms of number of contracts. Stock index futures are cash settled. If a futures contract is held to maturity, stock does not change hands between the buyers and sellers of futures. Cash payments are made to compensate for any deviation of the actual stock index from agreed futures index. Most futures contracts are closed out before they mature. Selling futures closes out a long futures position and buying futures closes out a short futures position. Each contract is to buy or sell a fixed value of the index. The value of the index is defined as the value of the index multiplied by...

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