When before the stock market opens, someone says "futures are up this morning," what exactly does that mean?

Question

For example, bloomberg.com showed that the S&P closed at 1462.79 yesterday. This morning, before the market open, the value of S&P futures is 1479.30, a 1.09% increase. What exactly does this mean?

Thanks!!

Answer 1

Futures are a financial instrument traded much like stocks or other indexes.

The DOW and S&P are traded during normal business hours. However, futures trade much longer hours. The futures contract are typically a leading indicator on where big money expects the market to go at some time in the future.

So, when someone says futures are up this morning, it means that the market is up. Sometime, take a look at $INDU or DIA and compare the chart to YMZ7 (Dec 07 Mini Dow).

You'll see they track very close, except that the futures trade longer.

By the time the market opens, the futures, will work to reconcile with where the actual market is by that point else someone could buy one/sell the other and try to make money off of the disrepency.

Hope that helps!

Answer 2

Futures Definition:
It is a financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.

Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge). On the other hand, anybody could speculate on the price movement of corn by going long or short using futures.

The primary difference between options and futures is that options give the holder the right to buy or sell the underlying asset at expiration, while the holder of a futures contract is obligated to fulfill the terms of his/her contract.

In real life, the actual delivery rate of the underlying goods specified in futures contracts is very low. This is a result of the fact that the hedging or speculating benefits of the contracts can be had largely without actually holding the contract until expiry and delivering the good(s). For example, if you were long in a futures contract, you could go short the same type of contract to offset your position. This serves to exit your position, much like selling a stock in the equity markets would close a trade.

When the futures are up, it shows that the market players are bullish on the day's trade.

Answer 3

Futures trading occurs before the market is officially open at 9:30.
Trading done after the market closes at 4:00 is called after market hours.

Answer 4

trading takes place while the market is close - so in your example shows that trading was up over night!!!