Recently, I found that many friends trading US stocks are actually quite interested in US futures, but because they don't understand it well, they haven't dared to try. In fact, US futures are not as complicated as you might think. Today, I’ll share what I’ve organized.

Simply put, a futures contract is an agreement between two parties to buy or sell an asset at a fixed price at a future date. US stock futures are derivatives based on US stock indices, such as the S&P 500 and Nasdaq 100. When you buy a US futures contract, you're essentially buying the value of a basket of stocks, which is calculated by multiplying the index points by a multiplier. For example, if the Nasdaq 100 is at 12,800 points, buying a Micro Nasdaq 100 futures (symbol MNQ) means a notional value of 12,800 × $2 = $25,600.

At futures expiration, physical delivery of stocks is not required; instead, settlement is done in cash. That is, profits and losses are calculated based on price changes, which is very convenient for individual investors. The four most actively traded US futures are based on the S&P 500, Nasdaq 100, Russell 2000, and Dow Jones Industrial Average. Each has mini contracts (E-mini) and micro contracts (Micro E-mini), with the micro version being one-tenth of the mini.

The CME offers these US futures products with trading open 23 hours a day, starting from 6 PM New York time on Sundays, synchronized with Asian market opening hours. Contracts are set quarterly, expiring on the third Friday of March, June, September, and December. Trading US futures requires posting an initial margin; for example, the initial margin for S&P 500 futures is about $12,320, and for Nasdaq 100 about $18,480. If your account balance falls below the maintenance margin, you need to add funds; otherwise, the broker will force a liquidation.

Choosing the right US futures contract involves several considerations. First, determine which market sector you are bullish on—whether the broad market, tech stocks, or small caps. Next, select the contract size based on your capital; for example, with $20,000, MES (Micro E-mini S&P 500) might be more suitable than ES. Also, consider volatility; Nasdaq 100 tends to be more volatile than the S&P 500, possibly requiring a smaller investment size.

US futures mainly serve three purposes. First is hedging—when the market declines, you can short futures to offset losses in your portfolio. Second is speculation—if you’re bullish on US stocks, buy futures; if bearish, sell futures to profit from price movements. Third is locking in future purchase prices—if you expect a large fund inflow in three months, you can buy equivalent futures now to lock in today’s price.

Calculating profit and loss on US futures is straightforward: price change multiplied by the multiplier. For example, if you buy when the S&P 500 is at 4,000 points and sell at 4,050 points, a 50-point increase, with a multiplier of $50, results in a profit of 50 × $50 = $2,500.

The leverage of US futures is roughly around 16 times, meaning a 1% index move can amplify your profit or loss to about 16.2%. Because of the high leverage, risk management is especially important. Always set stop-loss levels before opening a position; decide on them in advance and avoid reacting only after losses have grown.

If the contract size or margin requirements are too high, Contract for Difference (CFD) trading is an alternative. CFDs allow smaller minimum investments and initial deposits, with leverage up to 400 times, and no expiration date or rollover requirement, making them more suitable for individual investors. However, CFDs are over-the-counter (OTC) products, while futures are exchange-traded; each has its advantages and disadvantages.

In summary, US futures trading is suitable for hedging and speculation, but the risks are significant. Regardless of your purpose, carefully select the index and contract size, and establish a solid risk management system. For beginners, starting with micro contracts for practice is safer; once familiar, you can consider larger positions.