13. What Are Index Futures?
Index futures are futures contracts whereby a trader can buy or sell a financial index today to be
settled at a future date. Traders use index futures to speculate on the price direction of an index
such as the S&P 500.
Investors and investment managers also use index futures to hedge their equity positions
against losses.
KEY TAKEAWAYS
•Index futures are contracts to buy or sell a financial index at a set price today, to be settled at a
date in the future.
•Portfolio managers use index futures to hedge their equity positions against a loss in stocks.
•Speculators can also use index futures to bet on the market's direction.
•Some of the most popular index futures are based on equities, including the E-mini S&P 500,
E-mini Nasdaq-100 and E-mini Dow. International markets also have index futures.
