Guide to US Stock Futures Trading: From Beginner to Expert

Looking to trade US stock futures but don’t know where to start? Don’t worry, this comprehensive guide covers all the key information you need to understand.

What exactly are US stock futures?

The core concept of US stock futures is quite simple — it is a contract that commits to buying or selling a basket of US stocks at a specific price at a future date.

For example, take oil futures: buying a three-month oil futures contract at $80 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.

Similarly, US stock futures are not based on a single commodity but are based on a stock index basket. For example, buying Nasdaq 100 futures (code MNQ) means you are trading the value of a portfolio of 100 tech stocks:

Index points × Multiplier (USD) = Nominal value of the stock portfolio

If you buy one MNQ contract at 12,800 points: 12,800 × $2 = $25,600

What happens at expiration? Revealing futures settlement methods

Futures contracts are settled in two ways: physical delivery and cash settlement.

Commodity futures often involve physical delivery (you actually receive oil or soybeans), but US stock futures are different. Since delivering 500 individual stocks (the S&P 500 includes 500 companies) is impractical, they use cash settlement — exchanging the cash difference reflecting the index price change. This is also why trading US stock futures is relatively convenient.

What can US stock futures be used for? Three main purposes

1. Hedging to protect your investment portfolio

If you are bearish on the market, you can short futures to offset downside risk in your stock holdings. For example, a $20,000 US stock portfolio can be hedged with a micro S&P 500 futures contract: 4000 × $5 = $20,000

2. Speculation to profit from price differences

Bullish on US tech stocks? Simply buy Nasdaq 100 futures to participate. The leverage feature of futures allows you to amplify gains with less capital.

3. Lock in future purchase prices

If you expect to receive investment funds in three months but want to “lock in” today’s lower price, you can buy US stock futures contracts with a nominal value equal to your future investment amount.

Tip: Regardless of your purpose, prioritize trading active futures contracts with high trading volume and participation, so subsequent buying and selling will be smoother.

The four most active US stock futures products in the market

The four most traded futures based on: S&P 500, Nasdaq 100, Russell 2000, and Dow Jones Industrial Average.

Each index has two versions — mini contracts and micro contracts, with micro contracts being one-tenth the size of mini contracts.

How to choose the right futures contract for you?

Step 1: Clarify market direction Are you bullish on the broad market (S&P 500), tech stocks (Nasdaq 100), or small caps (Russell 2000)? Pick your main track.

Step 2: Select appropriate contract size Want to trade a $20,000 stock exposure? Use MES (micro S&P 500), because a single ES (mini) contract with a nominal value of around $200,000 might be too large.

Step 3: Consider volatility Nasdaq 100 tends to be more volatile than the S&P 500, so you might need a smaller investment size to manage risk.

Quick reference table for trading specifications

These are key parameters for eight common US stock futures:

Margin explanation: Before opening a position, you need to deposit the “initial margin” with your broker. Profits can be withdrawn, and losses will be deducted from your account. If your account balance falls below the “maintenance margin,” you must add funds; otherwise, the broker will force liquidation.

How to calculate profit and loss in US stock futures?

The logic is straightforward:

• Buy futures → profit when the index rises
• Sell futures → profit when the index falls

Profit = Price change (points) × Multiplier

Example with ES futures:

• Entry price: 4000 points
• Exit price: 4050 points
• Price change: 50 points
• Multiplier: $50
• Profit: 50 × $50 = $2,500

Common pitfalls to avoid in practice

Q: The contract is nearing expiration, and I want to hold position longer. What should I do?

A: You need to close your current contract and open a new one with a later expiration date — this is called “rollover.” Since US stock futures are cash-settled, if you let the contract expire without closing, the system will automatically settle your profit or loss at the index settlement price.

Q: What factors influence US stock futures prices?

A: US stock futures represent a basket of stocks, so all factors affecting stocks will influence futures — including corporate earnings, economic growth, central bank policies, geopolitical situations, and overall market valuation.

Q: How high is the leverage in US stock futures?

A: You can calculate it by dividing the nominal value by the initial margin. For example, with the S&P 500 at 4000 points: (4000 × 50) / 12,320 ≈ 16.2x leverage. This means a 1% move in the index results in approximately a 16.2% change in your investment.

Q: What is the most important thing to watch out for?

A: Many traders underestimate the risk of the nominal value. Remember: when trading one ES contract, you are exposed to about $200,000 worth of stocks, not just the $12,320 margin you deposited.

Q: What is the core of risk management?

A: US stock futures are high-leverage products, and short positions have theoretically unlimited losses. Strict stop-loss discipline is essential — decide your stop-loss level before opening the position.

Alternative for retail traders: CFDs (CFD)

Feeling that US stock futures are too large or the margin requirements are too high? Consider CFDs (CFD).

CFD is a flexible financial instrument that allows participation in futures-like trading with lower initial investment. Additionally, CFDs have no expiration date and do not require rollover.

Comparison: US stock futures vs. CFDs

( Advantages of CFDs

• More flexible contract sizes suitable for different capital levels
• Usually higher leverage
• No expiry date, no rollover worries
• Some brokers charge no commission
• Some support weekend trading

) Disadvantages of CFDs

• Some countries restrict or ban CFD trading
• High leverage can amplify both gains and losses
• Contract specifications vary across providers, which can be confusing
• Holding positions overnight incurs overnight financing costs

Final advice

US stock futures are used for hedging or speculation, but regardless of your purpose, they carry high risks. The key is to choose the right index, manage your position size reasonably, and strictly follow risk management rules.

While CFDs have similar profit and loss calculations, their product features differ significantly. Understanding these differences will help you select the most suitable trading tool.

Before trading, it is recommended to practice thoroughly with a demo account to familiarize yourself with how these tools operate in real trading.