index futures

Index Futures

A futures contract on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract.

Notes:

For example, the S&P 500 index is one of the most widely traded index futures contracts in the U.S. Often stock portfolio managers who want to hedge risk over a certain period of time will use the S&P 500 index future to do so. By shorting these contracts, stock portfolio managers can protect themselves from downside price risk of the broader market. However, by using this hedging strategy, if perfectly done, the manager's portfolio will not participate in any gains on the index instead the portfolio will lock in gains equivalent to the risk-free rate of interest.

Alternatively stock portfolio managers can use index futures to increase their exposure to movements in a particular index, essentially leveraging their portfolio.

See also: E-mini, Futures, Hedge, Index, Index Options, Leverage, S&P 500

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Index futures

A futures contract on an index (such as a foreign stock index) in the futures market.

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index futures

Futures contracts on stock indexes such as the S&P 500. Index futures are settled in cash.