Futures 101: The Difference Between Trading Stocks and Futures


Not well-versed in the futures market? Scared about a new kind of advanced product? Here are some basic points to get started.

Futures are different from traditional stocks and exchange-traded funds (ETFs) because they track an index. You don’t own anything. You simply have capital in your account and then go “long” or “short.” Profits or losses then accrue based on the index’s movement and your position.

The capital needed to begin is called the initial margin requirement. It varies for the different indexes. TradeStation’s margin rates are available here.

Each product moves differently based on movements in the underlying index. For example, S&P 500 E-minis (@ES) are worth $50 per index point while Nasdaq 100 E-minis move $20 per index point. Both have “micro” contracts at one-tenth their respective sizes.

Another big difference is that futures trade virtually around the clock during the week. Here are the key times for key stock indexes like the S&P 500 and Nasdaq-100:

  • Weekly open: Sunday at 6 p.m. ET.
  • Daily halts: Monday, Tuesday, Wednesday and Thursday between 5 p.m. ET and 6 p.m. ET.
  • Weekly close: Friday at 5 p.m. ET.

Note: Other products, like energy and precious metals, have different schedules.

The last big fundamental difference between futures and stocks is expiration. Companies like Apple (AAPL) or Microsoft (MSFT) have traded for years with the same symbols. Futures contracts, on the other hand, expire on a monthly or quarterly basis. This causes their symbols to change. Investors holding positions over the long term may also need to “roll” from one contract to the next.

Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement Investment and Trading Disclosures Booklet – Futures.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.