Want to trade US stock futures? This beginner's guide will help you get started quickly.

If you’re already trading US stocks, the next logical step is naturally US stock futures. However, the US stock futures market is more complex than stock trading. Today, we’ll give you a thorough introduction.

Core Concepts of US Stock Futures

Futures contracts are essentially commitments that require both parties to buy or sell an asset at a predetermined price at a specific future date. The most intuitive way to understand this is by looking at commodity trading.

For example, if you buy a crude oil futures contract today at $80 for delivery in three months, it means that in three months, regardless of how high oil prices rise, you will buy the specified amount of oil (say 1,000 barrels) at $80. If the price rises to $90 at that time, the contract’s value to you is $10 per barrel, which is your profit.

So, what about US stock futures? They are linked to US stock indices. But an index is just a number—what is the actual underlying asset behind US stock futures?

The answer is: a basket of stocks. When you buy or sell US stock futures contracts, you’re actually trading a portfolio of stocks calculated by the following formula:

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

For example, if you buy a micro Nasdaq 100 futures contract (symbol MNQ) when the Nasdaq 100 index is at 12,800 points, it’s equivalent to holding a portfolio of the same tech stocks as the Nasdaq 100 components, with a nominal value of:

12,800 × 2 USD = 25,600 USD

What to Do at Expiration? Understanding Futures Settlement

Futures contracts have two settlement methods: physical delivery and cash settlement.

Commodity futures often use physical delivery (traders actually receive the goods), but US stock futures use cash settlement. Why? Because delivering a basket of 500 stocks is impractical and impossible. Therefore, at expiration, the system calculates profit or loss based on the index price change and settles in cash, without actual stock delivery.

US Stock Futures Ecosystem: Four Major Contracts

The most actively traded US stock futures in the US market are these four, ranked by trading volume:

Each index has two specifications: E-mini and Micro E-mini. Micro contracts have leverage and margin requirements only one-tenth of the E-mini, making them more suitable for retail traders with smaller capital.

Quick Reference: US Stock Futures Trading Specifications

Before placing an order, these details are essential:

How to understand margin? When opening a position, you must deposit the initial margin, which is the exchange’s “entry fee.” If losses cause your account balance to fall below the maintenance margin, you must top up immediately; otherwise, your broker will forcibly close your position.

How to Choose the Right US Stock Futures Contract for You?

Step 1: Determine your market direction

If you are bullish on the overall market, choose the S&P 500 (ES/MES). If you are bullish on tech stocks, choose Nasdaq 100 (NQ/MNQ). If you are bullish on small caps, choose Russell 2000 (RTY/M2K). Picking the wrong direction is pointless.

Step 2: Select the appropriate contract size

Suppose you want to trade a position worth $20,000. Using a standard ES contract (which at 4000 points is worth $200,000) is too large. In this case, MES is the better choice. Micro contracts are designed to allow retail traders to participate more easily.

Step 3: Assess volatility

Nasdaq 100 tends to be more volatile than the S&P 500, so with the same capital, you might need smaller contracts to control risk.

What Can US Stock Futures Do? Three Main Uses Explained

Hedging your portfolio

Worried about a decline in your long US stock positions? Selling US stock futures short can hedge your risk. When the market falls, futures gains can offset stock losses, achieving risk mitigation.

Speculating for profit

Expect the Nasdaq 100 to rise? Buy NQ contracts directly, and profit from the index increase. The biggest advantage is leverage—amplifying gains—but it also increases risk.

Locking in a purchase price in advance

Don’t have enough cash but bullish on the current price? Buy futures to lock in the price, then convert to spot holdings once you have the funds. This is especially useful for investors expecting large capital inflows.

Remember: Regardless of your purpose, always choose actively traded main contracts with high liquidity for easy entry and exit.

How to Calculate US Stock Futures Profit and Loss?

The logic is simple: Price change × Multiplier = Profit or Loss

Example: If you buy ES futures

This explains why futures leverage is so attractive—small movements like 100 points can generate significant profits. But conversely, losses can also be magnified.

Four Things You Must Know When Trading US Stock Futures

What to do when the contract is nearing expiration?

You need to roll over. Close the expiring contract and open a new one with a later expiration date, usually with a single order. If you don’t roll over, the contract will settle automatically at the final settlement price, without stock delivery.

What factors influence futures prices?

Since US stock futures represent a basket of stocks, all factors affecting stocks will influence futures: corporate earnings, economic growth, central bank policies, geopolitical events, market valuations, etc.

How high can leverage go?

Leverage ratio = Nominal value ÷ Initial margin. For example, with the S&P 500 at 4000 points and an initial margin of $12,320, the leverage is approximately:

(4000 × 50) ÷ 12,320 ≈ 16.2x leverage. This means a 1% move in the index results in about a 16.2% change in your account.

How to manage risk?

Futures are leveraged products; short positions have theoretically unlimited losses. Strict stop-loss discipline is essential—set your stop-loss points before opening a position. This is not optional; it’s mandatory.

US Stock Futures vs. US Stock CFDs: Which to Choose?

US stock futures are suitable for large institutions and experienced investors, but they have clear drawbacks: large scale, high margin requirements, and periodic rollover needs.

In contrast, CFDs (Contracts for Difference) can overcome these limitations:

CFDs’ biggest advantage is low entry barriers, while still offering profit/loss calculations similar to futures, making them more friendly for retail traders with limited capital.

Summary

US stock futures are powerful tools for hedging and speculation, but fundamentally they are high-risk, high-reward leveraged products. Leverage amplifies both gains and losses, so traders must carefully select index directions, contract sizes, and strictly follow risk management rules.

Whether choosing futures or CFDs, understanding their differences helps you determine which tool better fits your capital and risk tolerance.