In index futures, a trader is able to buy or sell a financial index today for a future settlement date. Traders use index futures to speculate on the price path of an index, such as the S&P 500. Investors and financial managers use index futures to hedge their stock positions against losses.

As with other futures contracts, index futures give traders and investors the authority and duty to deliver the contract's cash value based on a benchmark index at a defined future date. The trader must provide certain financial worth at expiry even though any similar contract is deconstructed before expiry by an offsetting deal.

A stock index futures contract is a financial agreement between a buyer and a seller to exchange a predetermined amount of an index for another asset at a specific time in the future. The asset exchanged on the other side of the trade can be anything, but is usually cash or physical securities.