Before knowing what U.S. stock futures are, it is important to understand the definition of futures. Futures generally refer to a contract that stipulates the buying or selling of a specified commodity for a certain price at a specific point in time in the future. So, what does it mean when the futures trade higher ahead of the opening bell? It simply means these indices will trade higher following the opening bell. Simply put, it is an indication of how the market sentiment will be when the market opens.
You can trade stock futures on major U.S. stock exchanges just like you would do with traditional stocks. These major futures contracts are traded on the CME Globex system and are called E-mini contracts. The most common U.S. stock futures are the following:
- Dow Futures- a contract based on the widely followed Dow Jones Industrial Average (DJIA), an index of 30 major U.S. companies. The value of one Dow Future contract is 10 times the value of the DJIA. For example, if the DJIA is trading at 33,000, the price of one Dow Future is $330,000.
- S&P 500 Futures- S&P 500 futures contracts are agreements to buy or sell stocks listed on the S&P 500. As its name suggests, it’s an index made up of stocks of the 500 largest US companies. Unlike the stock exchange, S&P 500 futures traders are active five days a week, for 23.5 hours per day, plus Sunday evening.
- Nasdaq 100 Futures- Nasdaq 100 contracts track the stock prices of the 100 largest companies listed on the Nasdaq Stock Exchange.