Futures in plain English

A futures contract is a standard agreement to buy or sell something at a set price on a set future date. With index futures, that "something" is the value of a stock index.

You almost never hold one until that date. You buy the contract and sell it later (or sell first and buy back later), and your profit or loss is the change in its price.

Why ES and NQ follow the indexes

• ES is based on the S&P 500.
• NQ is based on the Nasdaq-100.

On expiry day, each contract is settled in cash at the index's value. Because everyone knows that, traders keep the futures price very close to the index the whole time. If the gap gets too big, someone buys the cheap one and sells the expensive one until it closes. The small difference that remains is called the basis.

Expiry and rollover

ES and NQ expire every quarter, in March, June, September and December. About a week before expiry, almost everyone moves to the next contract. That's the roll. Your platform shows it as a new symbol (for example December, then March).

Leverage, in one example

One ES contract is worth $50 × the index. If the S&P 500 were at 6,000, one contract would control $300,000 of stock exposure. You don't pay that. You post margin, a much smaller deposit.

That's leverage. A small move in the index is a big move relative to your deposit, in both directions.

For more on margin, daily settlement and regulation, see How futures work.

Quick recap

1. A futures contract is a standard, exchange-traded agreement. You trade its price.
2. ES and NQ settle to their index, so they track it closely.
3. Contracts expire quarterly and get rolled.
4. Leverage cuts both ways. Losses can exceed your deposit.