How Are Index Futures Traded?
Trading in stock index futures is tantamount to betting on the value of the underlying index. This is done for a specified price to be delivered at a specified future date. It is important to understand the behavior of stock market indices as it has significant implications for trading in stock index futures. Understanding the stock indices reveals how stock index futures are traded. These indices are developed to reflect the aggregate measures of the stock market performance and for quantifying the movements of stock market prices. This can extend to the whole market or a section of the market. These indices are used as a standard to compare the performance of investments. The index also serves as a leading indicator of a countrys economic performance. They are also used as an underlying asset for trading in the futures index.
