What Is Futures?
Futures are contracts to buy or sell a specific underlying asset at a future date. The underlying asset can be a commodity, a security, or other financial instrument. Futures trading requires the buyer to purchase or the seller to sell the underlying asset at the set price, whatever the market price, at the expiration date.
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Stocks are ownership certificates of a specific company. When you own a stock, its corresponding value represents your share or partial ownership of the company.
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Futures trading commonly refers to futures whose underlying assets are securities in the stock market. These contracts are based on the future value of an individual company's shares or a stock market index like the S&P 500, Dow Jones Industrial Average, or Nasdaq.
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Futures trading on exchanges like the Chicago Mercantile Exchange can include underlying "assets" like physical commodities, bonds, or weather events.