The recent negative price of oil futures is unprecented. Caused a lot of losses to traders and I heard even the brokerage software failed to work as expected. Is there any risk that price of index futures can go negative like oil? I can't imagine how it can happen. Can the experts here share your views? Any worst-case scenario you can think of that can cause this to happen?
I am not an expert, but logically indexfutures cannot go negative as there is no possibility to execute the future with a physical delivery. There are no transport nor warehouse cost to be paid. You also don't need storage space. Indexfutures can only executed by a payment.
I would say no. I agree with what Virtusa said earlier. I can see certain stocks with low volume trying to go negative but I am not sure if they technically can. Now the problem with an index going negative is that it means pretty much all major stocks lost their value. If that happens you need ammo and food, not your broker's execution.
most of index futures are very far from zero. I wonder which Index futures is close to zero. Then someone can attempt to enter a negative value.
I know that is why I said if it is getting close to negative territory, we have bigger problems than entering a negative value. Although 2 months ago oil was at $50 and that was also pretty far from zero and yet, here we are....
Absolutely not. Theoretically the index could fall to "0" but how could the value of a stock go negative?
OK, I am just trying to come up with a scenario here. The reason why a stock would be negative is that there is absolutely no buyers, and for some reason, sellers don't mind paying extra just to get ride of the stock.(for whatever reason) So let's say I am a politician and I buy a shitload of penny stocks in a worthless small pharma company, based on insider info. Then the government brings out a law that insider trading is punishable by death/very strict and long sentence. In that case, I wouldn't mind to lose extra money (more than what I invested) just to get the hell out of that position, before the stock may take off. Other scenarios could involve tax issues, when a large holder just doesn't want to be in the position but there are very few buyers, thus he pays extra to unload the stocks. Here is another one: I am elected to be a board member of a company. I own millions of a penny stock, but it is a conflict of interest for me to have those. Nobody wants that stock even for pennies, so I have to pay extra for someone to take them off of my hand. So in reality the stock's price is going to be negative when I get ride of them.