A futures contract whose underlying is a stock index (such as the S&P 500 in the United States). This contract constitutes an agreement to buy or sell a standardized value of a specific stock index, for a specified price at a pre-determined future date.
It allows investors to take a view on the entire performance of a particular stock market. Investors also can short sell a stock index by using futures or, moreover, can hedge a long position against a decline in the entire index value. Being futures on a set of stocks, these contracts combine the features of stock trading with those of commodity futures trading. Typically, if exercised, index futures are settled in cash. The index futures is also known as an equity index futures (also: a stock index futures).
