Recently, many friends have asked me about U.S. stock futures, and I realize that many people are still a bit unfamiliar with this area. So I’ll organize my understanding and share it with everyone.

First, it’s important to understand what U.S. stock futures are. Simply put, a futures contract is an agreement where both parties agree to buy or sell an asset at a predetermined price at a future date. For example, taking oil as an example, you might buy a three-month delivery oil futures contract today at $80 per barrel, which means you commit to purchasing a certain amount of oil at that price in three months. If the oil price rises to $90, your contract becomes more valuable.

U.S. stock futures are slightly different because they are pegged to stock indices rather than physical commodities. An index is just a number representing a basket of stocks. For example, buying Nasdaq 100 futures means trading a portfolio that includes technology stocks. If the index is at 12,800 points, the nominal value of the Micro Nasdaq futures (code MNQ) is 12,800 multiplied by $2, which equals $25,600.

What happens at expiration? U.S. stock futures are cash-settled, meaning there’s no need to deliver the actual stocks—whether it’s 500 or 100 stocks—just settle based on the price change. This design is quite clever because physically delivering so many stocks would be too complicated.

Now, let’s talk about the most traded U.S. stock futures. The main ones are S&P 500, Nasdaq 100, Russell 2000, and Dow Jones Industrial Average. Each index has two specifications: E-mini and Micro E-mini, with the Micro contracts requiring one-tenth of the margin of the E-mini. The S&P 500 futures codes are ES and MES; Nasdaq is NQ and MNQ; Russell 2000 is RTY and M2K; Dow Jones is YM and MYM. All are traded on the CME.

Trading these U.S. stock futures requires an initial margin deposit. For example, the S&P 500 ES contract needs about $12,320, while MES only needs $1,232. If you make a profit, you can withdraw it; losses are deducted from your account. If your account balance falls below the maintenance margin, you need to add funds; otherwise, the broker will force a liquidation.

The trading hours for U.S. stock futures are quite extensive, nearly almost 24/5. Trading starts at 6 p.m. New York time on Sundays and runs until 5 p.m. on Fridays, with a one-hour pause from 5 to 6 p.m. Monday through Thursday. All contracts are quarterly, expiring on the third Friday of March, June, September, and December. On the expiration day, the final settlement price is determined at 9:30 a.m. New York time based on the opening price of the NYSE.

Choosing the right contract involves several factors. First, consider which market sector you are bullish on—whether the overall market, tech stocks, or small caps. Second, select an appropriate contract size to avoid excessive margin pressure. Third, consider volatility; Nasdaq 100 tends to be more volatile than the S&P 500, so smaller positions might be advisable.

U.S. stock futures mainly serve three purposes. First, hedging—protecting existing portfolios. For example, if you hold a lot of U.S. stocks and worry about a market decline, you can short U.S. stock futures to offset potential losses. Second, speculation—aiming to profit from index movements. Third, locking in a future purchase price; if you expect to have funds available in three months, you can buy futures now to lock in today’s price.

Calculating profit and loss is straightforward: price change multiplied by the contract multiplier. For example, if you buy ES futures at 4,000 points and sell at 4,050 points, a 50-point increase, multiplied by $50 per point, results in a $2,500 profit.

Here are some practical tips. If a contract is nearing expiration but you want to maintain your position, you need to close the current contract and open a new one—this is called roll-over. The factors influencing U.S. stock futures prices are essentially the same as those affecting stocks: company earnings, economic growth, monetary policy, geopolitical events, etc. The leverage level is quite high—about 16 times for S&P 500 futures—meaning a 1% move in the index could result in roughly a 16% change in your account. Risk management is crucial; always set stop-loss orders because short positions can theoretically incur unlimited losses.

Some people think the margin requirements for U.S. stock futures are high, but there are alternatives. Contracts for Difference (CFDs) are one such option—they require lower initial investments, offer higher leverage, and have no fixed expiration date, allowing you to close positions at any time. However, CFDs are over-the-counter (OTC) products, whereas U.S. stock futures are exchange-traded, which is a key difference.

In summary, U.S. stock futures are high-risk, high-leverage tools suitable for hedging and speculation. Regardless of your purpose, you should carefully select indices, control your position sizes, and implement solid risk management. Understanding the differences between U.S. stock futures and CFDs will help you choose the product that best fits your needs.