The term index futures refers to futures contracts that allow traders to buy or sell a contract that is derived from a financial index today to be settled at a future date. Originally intended for institutional investors, index futures are now open to individual investors as well.

An index futures contract works just like a regular futures contract. It is a legally binding agreement between a buyer and a seller that allows traders to buy or sell a contract on a financial index and settle it at a future date. An index futures contract speculates on where prices move for indexes like the S&P 500.

The S&P 500 and Dow Jones Industrial Average are two of the top large-cap indexes, but others include the S&P 100, the Dow Jones U.S. Large-Cap Total Stock Market Index, the MSCI USA Large-Cap Index, and the Russell 1000.