Index Futures
A futures contract on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract.
Investopedia Commentary
For example, the S&P 500 index is one of the most widely traded index futures contracts in the U.S. Often stock portfolio managers who want to hedge risk over a certain period of time will use the S&P 500 index future to do so. By shorting these contracts, stock portfolio managers can protect themselves from downside price risk of the broader market. However, by using this hedging strategy, if perfectly done, the manager's portfolio will not participate in any gains on the index instead the portfolio will lock in gains equivalent to the risk-free rate of interest.
Alternatively stock portfolio managers can use index futures to increase their exposure to movements in a particular index, essentially leveraging their portfolio.
Related Links
Futures Fundamentals
Profiting from Time-Value Decay with S&P 500 Options on Futures
A Beginner's Guide To Hedging
Interpreting Volume for the Futures Market
See also: E-mini, Futures, Hedge, Index, Index Options, Leverage, S&P 500
index futures