What is an equity index future?

Our summary

A 90-second introduction to futures on stock indices.

• What they are: futures contracts on equity indices such as the S&P 500, the Nasdaq-100 and the Dow Jones Industrial Average, plus non-US benchmarks.
• Cash settled: no shares change hands at expiry; gains and losses are settled in cash.
• Quarterly cycle: most have quarterly expiration months: March, June, September and December.
• Nearly round-the-clock trading: the video says they trade practically 24 hours a day, six days a week, which is why index futures move before the stock market opens.
• Uses: hedging a stock portfolio or expressing a view on the whole market.

Our take: when you see "futures are up" before the US open, this is what people mean. Index futures are leveraged, so they carry far more risk per dollar than an index fund.