Futures in the stock market are standardized derivative contracts that obligate the buyer to purchase, and the seller to sell, a specific asset-such as stocks or stock indexes-at a predetermined price on a set future date

. These contracts are legally binding agreements traded on futures exchanges, where the terms like quantity, quality, and delivery date are standardized to facilitate trading

. Key characteristics of stock futures include:

• They are based on the future value of an underlying asset, such as individual company shares or stock market indexes like the S&P 500 or Dow Jones Industrial Average

• Futures contracts have expiration dates, after which the contract must be settled, either by physical delivery of the asset or, more commonly in stock futures, by cash settlement

• The buyer and seller agree on a fixed price at the contract's inception, regardless of the market price at expiration, allowing traders to hedge against or speculate on future price movements

• Most futures contracts do not result in physical delivery because traders typically close or roll over positions before expiration

Futures differ from owning stocks in that stocks represent ownership in a company with voting rights and potential dividends, while futures are contracts representing an obligation to transact in the future without conferring ownership rights

. In summary, futures in the stock market are financial contracts that allow investors to lock in prices or speculate on the direction of stock prices or indexes at a future date, providing tools for hedging and trading with leverage