Stock index futures are financial contracts that allow traders and investors to buy or sell a specific stock market index at a predetermined price on a future date. These contracts are settled in cash rather than physical delivery of stocks, as they represent a basket of stocks rather than individual securities.
Key Features:
- Underlying Asset – Based on a stock index (e.g., S&P 500, Nasdaq-100, Dow Jones Industrial Average).
- Leverage – Allows traders to control a large position with a smaller initial margin investment.
- Hedging & Speculation – Used by institutional and retail investors to hedge portfolio risk or speculate on market movements.
- Expiration & Settlement – Contracts have set expiration dates and are typically cash-settled.
Stock index futures serve as a leading indicator of market sentiment and are widely used by traders to anticipate market movements before regular trading hours.
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