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To: Steve Sanchez who wrote (19641)	6/2/1999 2:00:00 PM
From: Ed Forrest	Read Replies (1) \| Respond to of 41369

More news Taking a risk -- Futures trading on Net stocks: The Kansas City Board of Trade on Tuesday launched the first-ever futures contract based on an index of 50 Internet companies, including America Online and eBay. Posted at 1:02 a.m. PDT Wednesday, June 2, 1999 Kansas City exchange launches Internet futures contract CHICAGO (AP) -- Buying low and selling high has become more of a challenge in the volatile world of Internet stocks, but one of the nation's futures exchanges is hoping to make life simpler. The Kansas City Board of Trade on Tuesday launched the first-ever futures contract based on an index of 50 companies that derive most of their revenue from the Internet industry, including America Online and eBay. ''The Internet sector is very volatile. That's the attractiveness of having an index like this -- providing a basket of companies to invest in,'' said Steve Harmon, senior investment analyst for internet.com LLC, the oldest Internet stock index in the marketplace. It is partnering with the Kansas City exchange to launch the futures and options index. Trading of The Internet Stock Index, known as Isdex, comes at a time when Web stocks appear to be losing their luster on Wall Street. Stalwarts such as Amazon.com and e-Trade have seen their stocks slump -- some falling as much as 50 percent from their peaks -- as investors' love affair with anything to do with the Web shows signs of souring. Analysts say more investors are taking a closer look at a company's bottom line or its future earnings potential. ''This speaks to the need for a good hedge vehicle,'' said Michael Baude, the Kansas City exchange's president and chief executive. ''Anybody who is really nervous about a big run-up in their portfolio of Internet stocks or doesn't want to sell them for tax reasons can look at the (Isdex) as an attractive option.'' Like all futures trading, investors in Isdex essentially ''bet'' the underlying value of the portfolio will be higher or lower at a given point, becoming winners or losers if they're right. An option gives buyers the right -- but not the obligation -- to buy or sell a commodity in the future, so if investors aren't sure of a fall or rise, they can take a little longer to decide. The Isdex, which also includes such companies as RealNetworks, Yahoo, CDnow and Beyond.com, has quarterly contract months at $100 multiplied by the futures price. That currently represents a basket of stocks with an underlying value of $50,000. Initial money down is $1,875, with prices fluctuating at a minimum of $5 per contract, or .05 point. The exchange initially expects to attract sophisticated smaller investors and larger, institutional hedge funds, but it also hopes to draw people from around the world who may be unsure about betting on an individual company, said Jeff Borchrdt, the exchange's senior vice president. Borchrdt noted the futures contract, if successful, could help remove some of the volatility of Internet stocks since the index would most likely be used to balance potential losses from individual investments. That could help prevent panic selling, lower broker commission costs and cut tax obligations. Still, futures trading is not for the faint-hearted. The active contract swung 100 points in the first two hours of trading, from a high of 598.33 to a low of 494.36. If trading started at 500 points, someone made more than $9,830 at the high, while another investor lost $600 at the low. Critics also say investors may be more interested in betting the index will fall over time, but few could be willing to bet it will rise. That could create a gap between buyers and sellers that would render the index useless. To interest investors, the exchange is offering free real-time quotes off its Web site (www.kcbt.com) and simulated trading for up to one month. Ed Forrest