Pretty soon, an abysmal day on the Prague Stock Exchange could be just as exciting for investors as a great one.

In the second half of this year, the PSE will take the first step in its long-term modernization plan by offering futures on the market.

Different from traditional stocks, which only generate profit for investors when they go up, futures allow traders to speculate and make money on both positive and negative developments in an individual company or currency — or even the entire market.

"Futures will allow traders to get into more complex speculations on the development of the entire market, including its rise or decline," said Andrea Ferancová, a stockbroker at Wood & Co.

Futures are the first part of the PSE's development strategy to introduce financial derivatives, including options and other products, to the market, and there's already huge interest among investors, according to Petr Koblic, general director of the Prague Stock Exchange.

"All the most significant players on the stock exchange have expressed huge interest in the introduction of futures trading in Prague," Koblic said.

In addition to speculating, futures allow traders to hedge investments in their portfolios against potential downturns in the market.

Buying a future from a bank or stockbroker only requires an investor to pay the premium on the contract, not its entire value. This means that futures are likely to bring more action to the PSE.

"Investors will be able to invest without having all of the money they want to invest," Koblic said. "They'll only need to pay the margin [on the futures contract], and they'll be able to join into the trading."

Judging by how other markets in the region have responded to the introduction of financial derivatives, futures could give a boost to the already booming PSE, said Jan Procházka, an analyst at Cyrrus brokerage house.

"Bringing derivatives such as futures to the Warsaw Stock Exchange" dramatically increased that market's growth, he said.

Strong position

Interest in futures trading has been enormous, especially among investors who are already involved in euro futures, according to analysts. Futures should attract a new batch of both domestic and foreign investors to the PSE, said Tomáš Matuška, a broker at BH Securities.

In regards to the market's development this year, analysts say investors are likely to pay attention to two factors: the general election in June and electricity giant ČEZ, which increased around 80 percent on the PSE last year and accounts for around a third of the exchange's overall trading volume.

The PSE's trading volume was 1.04 billion Kč last year, placing it second in the region, just behind the Vienna exchange. Markets in Warsaw, Bratislava and Budapest did not perform as well.

Two in one

In March the two indexes on the PSE, the PX-50 and the blue chip PX-D, will merge. The PSE decided to do this partly to facilitate the introduction of futures but also to make the exchange more simple and transparent to investors, PSE General Director Koblic said.

The two indexes are also almost identical.

"Originally, the PX-50 index tracked the 50 top-selling stocks that had the most impact on the market's development, so the PX-D index was specially developed to monitor the blue-chip market," Wood & Co's Ferancová said. "Later, however, trading on the Prague Stock Exchange shrank to nine blue chips, so there's no need for two indexes any more."

After 12 years, the PX-50 index will be quoted for the last time March 17. A new index, the PX, will indicate developments on the PSE starting March 20.