Recently, many friends have asked me about US stock index futures, so I’ve organized my understanding here in hopes of helping everyone.

Speaking of US stock index futures, they are essentially a type of futures contract that allows you to trade stock indices at a predetermined price at a future date. It sounds complicated, but imagine this scenario: you believe technology stocks will rise over the next three months, but you don’t have enough money right now. At this point, you can lock in today’s price with futures and wait until you have the funds to execute.

The main four US stock index futures, ranked by trading activity, are the S&P 500, Nasdaq 100, Russell 2000, and Dow Jones Industrial Average. Each has two contract sizes—mini contracts and micro contracts, with micro contracts being one-tenth the size of mini contracts. For example, Nasdaq 100 futures (codes NQ/MNQ): if the index is at 12,800 points, buying one micro contract equals a nominal value of $25,600 worth of a basket of tech stocks.

I personally prefer using micro contracts because the initial margin is relatively low. For example, for the S&P 500, the micro contract (MES) requires only $1,232 as initial margin, while the mini contract (ES) needs $12,320. This is much more friendly for retail traders.

Regarding settlement, US stock index futures are cash-settled rather than physically delivered. Why? Because you can’t actually deliver 500 stocks. So, at expiration, you only need to calculate profit or loss based on price changes—no need to hold the actual stocks.

Trading hours are also noteworthy. US stock index futures are open nearly 24/7, starting from 6 PM New York time on Sunday until 5 PM Friday. This means you can start trading when Asian markets open. All futures contracts expire on the third Friday of March, June, September, and December each year.

Many people ask me what US stock index futures are used for. Honestly, there are three main purposes. First is hedging—using short futures to protect your stock portfolio. Second is speculation—if you’re bullish on a sector, you can directly buy the corresponding futures contract. Third is locking in prices in advance, especially when you expect a future influx of funds.

Profit calculation is actually very simple. For example, if you buy ES at 4,000 points and sell at 4,050 points, you make 50 points. Since the ES multiplier is $50, the profit is 50×50 = $2,500.

But I have to be honest with you: the leverage in US stock index futures is indeed high. Taking the S&P 500 as an example, $12,320 of margin corresponds to a nominal value of $200,000, giving roughly 16x leverage. This means a 1% move in the index could result in a 16% change in your account. Therefore, risk management is absolutely crucial, and setting stop-losses is necessary.

Another important point: if your contract is nearing expiration but you want to maintain your position, you need to roll over—that is, close your current contract and open a new one with a later expiration date.

Finally, besides futures, there’s also Contract for Difference (CFD). CFDs offer higher leverage, lower initial margins, and no expiration date, but come with higher risks. If you think the scale of US stock index futures is too large or the margin requirements are too high, CFDs might be worth exploring. But whichever you choose, make sure to do your homework, because high leverage means high risk.