What is Index Futures and what does it mean?

A futures contract on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract.
Index Futures is one of the most widely traded index futures contracts in the U.S through S&P 500 Futures. This means stock portfolio managers who want to hedge risk over a certain period of time often use S&P 500 futures to do so.
By shorting these contracts, stock portfolio managers can protect themselves from the downside price risk of the broader market. However, by using this hedging strategy, if perfectly done, the manager's portfolio will not participate in any gains on the index; instead, the portfolio will lock in gains equivalent to the risk-free rate of interest. Alternatively, stock portfolio managers can use index futures to increase their exposure to movements in a particular index, essentially leveraging their portfolios.

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An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Worldwide Futures Systems is a registered branch office and dba of Postrock Brokerage, LLC [NFA ID: 0413763]