Complete Guide to US Stock Index Futures: Master US Stock Futures Trading from Scratch

What exactly are US stock index futures?

Many US stock investors have been curious about US stock index futures but stop short due to unfamiliarity. In fact, futures are not so complicated that they cannot be understood; grasping the core logic allows for quick entry.

The essence of futures is a forward contract—both parties agree to buy or sell an asset at a predetermined price at a future date. The most intuitive way to understand this is “locking in the price in advance.”

Here’s a relatable example: Suppose you sign a crude oil futures contract to deliver in three months at $80 per barrel. This means that regardless of whether oil prices rise to $90 or fall to $70 in three months, you must transact at $80. If the price indeed rises to $90, this contract benefits you, allowing you to profit from the difference.

US stock futures are products that track US stock indices. Since an index itself is just a number, what is the actual underlying asset of US stock futures? The answer is a basket of stocks’ combined value.

When you trade US stock futures, you are buying and selling the value represented by this formula:

Index points × Contract multiplier = Nominal value of the stock portfolio

For example, if the Nasdaq 100 index is at 12,800 points, and you buy a micro Nasdaq 100 futures contract (code: MNQ), you are essentially buying a basket of tech stocks with the same composition as the index, with a nominal value of:

12,800 × $2 = $25,600

This explains why the core of US futures trading is tracking the index trend, not individual stocks.

How are US stock futures settled? Cash or delivery?

When a futures contract expires, investors need to clarify: how is the settlement calculated?

Futures settlement is divided into two methods:

Physical delivery — actual exchange of assets (like oil, grains, currencies)

Cash settlement — calculating the difference between the contract price and the spot price, and settling in cash

Almost all US stock futures use cash settlement. There is a reason: the S&P 500 includes 500 stocks, and the Nasdaq 100 includes 100 stocks. Delivering all these different stocks physically is impractical in terms of logistics and settlement. Therefore, exchanges stipulate that at expiration, only cash is exchanged based on the final settlement price versus the contract price, and investors do not receive physical stocks.

What are the main products in the US stock futures market?

The four most active US stock futures products, ranked by trading volume, track four different indices:

Notice? Each index has two contract specifications: “Standard Contract” (e.g., ES) and “Micro Contract” (e.g., MES). Micro contracts are one-tenth the size of standard contracts, making them more friendly for retail investors with limited capital.

Different contracts also have different multipliers. For example, the S&P 500 futures: ES has a multiplier of $50, and MES has $5. In other words, a 1-point move in the index results in a $50 change for the standard contract and $5 for the micro contract.

Key specifications to know before trading US stock futures

Before placing an order, you must understand the specifications of these 8 major US futures products:

Margin concept is crucial: The initial margin is the amount you must deposit to open a position; the maintenance margin is the minimum balance you must maintain. If your account falls below the maintenance margin, your broker will force liquidation. Therefore, in actual trading, always keep a buffer well above the minimum requirement.

Main scenarios for using US stock futures

US stock futures appeal to both retail and institutional traders because they can meet three main needs:

1. Hedging risk

Suppose you hold a stock portfolio and worry about a market downturn. Instead of selling all stocks (which incurs taxes and fees), you can short an equivalent US futures contract. When the market drops, the profit from the futures short can offset the losses in your stock holdings. This is the power of hedging.

2. Directional speculation

If you believe US tech stocks will rise, you can directly buy Nasdaq 100 futures. When the index goes up, you profit. Compared to buying 100 tech stocks individually, futures allow you to participate in the same market scale with less capital.

3. Locking in future entry points

Suppose you plan to invest a large sum in three months, but current prices are attractive. You don’t want to miss the opportunity. What to do? Buy futures contracts with a nominal value matching your target. This “locks in” today’s price; when your funds arrive in three months, you can close the futures position and establish a spot position simultaneously, resulting in an effective entry price close to your ideal.

A key reminder: Regardless of the purpose, always choose highly liquid, widely participated contracts to avoid liquidity risk—difficulty closing positions due to lack of buyers or sellers.

How to calculate profit and loss in US stock futures?

The calculation is straightforward, based on this core formula:

Profit/Loss = Price change (points) × Contract multiplier

For example, with an ES contract, suppose:

• Buy at 4000 points
• Sell at 4050 points
• Price change: +50 points
• Contract multiplier: $50/point
• Profit: 50 × 50 = $2,500

Conversely, if the price drops to 3950 and you sell, it’s a loss of 50 × $50 = $2,500.

This explains why leverage amplifies both gains and risks— a 1% index move, with leverage over 16x, can translate into over 15% of capital change.

Key risks and countermeasures in US stock futures trading

How to handle expiring contracts?

Futures have a clear expiry date (the third Friday of each quarter). To maintain a position, you need to perform a “rollover”—close the expiring contract and open a new one with a later expiry. This can usually be done with a single order.

What factors influence US futures prices?

Since futures represent a basket of stocks, all factors affecting stocks will impact futures:

• Corporate earnings
• Macroeconomic data
• Central bank interest rate policies
• Geopolitical events
• Overall market valuation

In the short term, technical factors (support/resistance levels, moving averages) also influence prices.

How large is the leverage?

Leverage = Nominal contract value ÷ Initial margin

For example, with S&P 500 futures at 4000 points:

(4000 × $50 ÷ 12,320 ≈ 16.2x leverage

Meaning a 1% move in the index results in approximately 16.2% change in capital.

) What is the golden rule of risk management?

US stock futures are leveraged tools with potentially unlimited losses (especially when shorting). Therefore:

✓ Always set stop-loss levels before opening positions and strictly execute them ✓ Never risk all your capital; keep sufficient margin buffer ✓ Limit risk per trade to 2-3% of total account balance ✓ Before overnight positions, check for overnight risk alerts

US stock futures vs. Contract for Difference (CFD): which to choose?

For some investors, futures pose barriers: large contract sizes, high initial margins, periodic rollover requirements.

CFDs emerged as a flexible alternative, offering:

In simple terms: Futures suit experienced investors with substantial capital; CFDs are more suitable for beginners and small traders.

Summary: core points of US futures trading

US stock futures are essentially leverage tools tracking stock index movements, widely used for hedging and directional speculation. Due to leverage, both gains and losses are magnified.

Successful US futures trading requires:

1. Correct market judgment — choosing the right index direction
2. Appropriate contract selection — micro or standard based on capital
3. Strict risk management — setting stops, avoiding over-leverage
4. Sufficient liquidity awareness — prioritizing main liquid contracts

New investors can start with demo accounts to familiarize themselves, then gradually use small real funds to practice, accumulating experience. Always stay updated with economic calendars and market announcements, as major events can cause sharp futures market swings.

Once you understand the operation mechanism of US stock futures, you’ve crossed the entry threshold. The next step is to continuously test and refine your strategies through actual trading.