Stock futures are contracts that let you bet on where a stock price will go at a specific time in the future, without owning the stock itself

A stock future is an agreement to buy or sell 100 shares of a particular stock on a set date at a price you lock in today. You do not own the stock. Instead, you are making a contract with another trader that says: "On December 15th, I will buy 100 shares of Apple at $150 per share, no matter what the price is then." If Apple trades at $160 on that date, you profit $10 per share ($1,000 total). If it drops to $140, you lose $10 per share.

The appeal is leverage. You do not pay the full price upfront. Instead, you put down a small deposit called margin — often 5 to 20 percent of the contract's value — and control the full amount. This means small price moves create large percentage gains or losses. It also means you can lose more than you put in, which is the biggest risk futures carry.

Stock futures are traded on exchanges like the Chicago Mercantile Exchange (CME), not on the stock market itself. They trade almost 24 hours a day during the week, so you can trade them when the stock market is closed. Most individual investors never touch them; they are mainly used by professional traders, hedge funds, and large institutions.

Key Takeaways

  • A stock future is a contract to buy or sell 100 shares at a locked-in price on a future date, and you control it with a small deposit rather than paying the full amount upfront.
  • Leverage amplifies both gains and losses — a 5 percent move in the stock price can swing your deposit by 50 percent or more.
  • You can lose more money than you deposited because you are responsible for the full contract value if the price moves against you.
  • Stock futures trade 24 hours a day on exchanges like the CME, not on the regular stock market, and are mainly used by professional traders.
  • Most futures contracts are closed out before the delivery date; actual delivery of shares is rare for individual traders.

How the leverage and margin deposit work

When you buy a stock future, you do not pay the full contract price. Instead, your broker requires a margin deposit — a fraction of the total value. If one contract controls 100 shares of a $150 stock, the full value is $15,000. Your broker might require only $1,500 to $3,000 as a deposit.

This is where leverage cuts both ways. If the stock rises $5, your contract gains $500 (100 shares × $5). That is a 17 to 33 percent return on your $1,500 to $3,000 deposit. But if the stock falls $5, you lose $500 — and your broker will demand you add cash to your account to cover the loss. If you cannot, they close the position and you realize the loss when ready.

The real danger: if the stock moves sharply against you, your losses can exceed your deposit. If the stock crashes $20 per share, you owe $2,000 on a $1,500 deposit. Your broker covers it and you owe them the difference. This is called a margin call, and it is one reason futures are considered high-risk.

The difference between owning stock and owning a future

When you own a stock, you own a piece of the company. You can hold it forever, collect dividends, and vote on shareholder matters. A stock future is purely a contract — you own nothing. You are betting on price movement only.

Stock futures also have an expiration date. A December Apple future expires in December. You must either close the contract (sell it to someone else) or let it settle on the expiration date. Most traders close their positions days or weeks before expiration; very few actually take delivery of the shares.

Stocks trade during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). Futures trade almost around the clock, so you can react to news that breaks after the stock market closes. This speed and access appeal to active traders, but it also means you can lose money while you sleep.

Why traders use stock futures instead of buying the stock

Leverage is the main reason. A trader with $5,000 can control $50,000 or $100,000 worth of stock through futures. The same $5,000 in actual stock buys only $5,000 worth. For traders betting on short-term price swings, the leverage makes the math work.

Shorting is another reason. With a stock future, you can profit if the price falls just as easily as if it rises. You straightforward sell the contract first and buy it back later at a lower price. Shorting actual stock is harder — you have to borrow shares from your broker, and not all stocks can be borrowed.

Hedging is a third use. A large investor who owns 10,000 shares of a stock might sell futures contracts to protect against a price drop. If the stock falls, the futures gain offsets the loss in the shares they own. Institutions use this strategy constantly; individual investors rarely do.

The costs and fees involved

Futures brokers charge a commission per contract, typically $10 to $50 per round trip (buying and selling). This is lower than stock commissions as a percentage, but it adds up if you trade frequently. Some brokers charge per side (buy or sell separately) rather than per round trip.

You also pay the bid-ask spread — the difference between the price someone will pay and the price someone will sell at. This is usually small for popular contracts like S&P 500 futures, but wider for less-traded stock futures.

There are no dividend payments on futures. If you hold a future through a dividend date, you do not receive the dividend. The contract price adjusts downward on the ex-dividend date, but you do not get cash. This is one reason holding futures long-term is less attractive than owning the stock itself.

How to close a futures position before expiration

You do not have to hold a future until its expiration date. In fact, most traders close their positions days or weeks early by doing the opposite trade. If you bought a December Apple future, you close it by selling a December Apple future at the current market price. The difference between what you paid and what you sold it for is your profit or loss.

This is how most futures trading works in practice. You enter a contract, watch the price move, and exit when you hit your profit target or your loss limit. The contract is closed and you owe nothing more. You never take delivery of the actual shares.

If you do hold until expiration, the contract settles in cash. You do not receive 100 shares. Instead, the exchange calculates the difference between your locked-in price and the final settlement price, and credits or debits your account. This is called cash settlement, and it is standard for stock index futures and most individual stock futures.

The risks that make futures different from stock ownership

The biggest risk is losing more than you invested. Because you control a large position with a small deposit, a sharp move against you can wipe out your deposit and leave you owing money to your broker. This cannot happen with stock — the worst case is your shares go to zero and you lose 100 percent of what you paid.

Leverage also means you can be forced out of a position. If your account balance falls below the maintenance margin requirement, your broker closes your position automatically, locking in your loss. You have no choice in the matter. With stock, you can hold through any price decline.

Futures are also marked to market daily. Every night, your account is settled based on the closing price. If you are losing money, you see the loss when ready and your broker may demand you add cash the next morning. This constant pressure is why futures trading is mentally taxing and why most individual investors avoid it.

Frequently Asked Questions

Can I buy a stock future with the same broker I use for regular stocks?

Not usually. Stock futures require a separate futures account with a broker licensed to trade them, such as Interactive Brokers, TD Ameritrade's thinkorswim, or E-TRADE. Your regular stock broker may not offer futures, or may require you to open a separate account and pass a risk questionnaire.

What happens if I hold a future past the expiration date?

You cannot. The contract expires and is settled automatically. For stock futures, this is usually a cash settlement — the exchange calculates your profit or loss based on the final settlement price and deposits or withdraws the amount from your account. You do not receive shares.

How much money do I need to start trading stock futures?

Brokers typically require a minimum account balance of $2,000 to $5,000 to open a futures account. Individual contracts require a margin deposit that varies by broker and the stock, usually $1,000 to $5,000 per contract. These are minimums; most traders keep much larger balances to avoid margin calls.

Are stock futures the same as index futures like the S&P 500?

No. Index futures track a basket of stocks (like the 500 companies in the S&P 500), while stock futures track a single company. Index futures are more liquid and widely traded. Stock futures on individual companies are less common and less liquid, making them harder to buy and sell quickly.

Can I use futures to replace my stock portfolio?

Not as a long-term strategy. Futures are designed for short-term trading and carry much higher risk. You also do not receive dividends, and holding costs accumulate. For long-term investing, owning the stock itself is simpler, safer, and more tax-efficient.