The short version
- A futures account is held with a futures broker and is kept separate from an ordinary share account, with its own rules and protections.
- Each contract has a fixed multiplier, so small index moves become sizeable dollar amounts; gains and losses are settled daily.
- Index futures trade almost around the clock on weekdays, which is why they are watched before the US stock market opens.
A futures account is a brokerage account set up specifically to trade futures contracts: exchange-traded agreements to buy or sell something, such as a stock index, at a set price on a future date. It sits apart from an ordinary share account, uses its own form of margin, and settles gains and losses in cash at the end of every trading day. This guide explains those mechanics with numbers, and shows why index futures are the first thing many market watchers check each morning.
What a futures account is, and who holds it
In the US, futures accounts are carried by firms registered with the Commodity Futures Trading Commission (CFTC) as futures commission merchants, which must be members of the National Futures Association (NFA). Customer money has to be kept segregated from the firm's own funds. The protection is different from a share account, though: the securities compensation scheme that covers many US brokerage accounts does not cover futures. Other countries have their own regimes, and retail access to futures varies. The broker checklist applies here too, starting with the regulator's register.
Before approving futures trading, a broker normally asks about your experience, income and understanding of the risks, and gives you a formal risk disclosure. That is not a formality: futures are leveraged by design.
How a contract works, with numbers
Every futures contract has a multiplier that converts index points into dollars. According to CME Group, the Micro E-mini S&P 500 contract is worth $5 per index point and its larger sibling, the E-mini S&P 500, $50 per point. The smallest price step, a tick, is 0.25 points, or $1.25 on the micro contract.
Illustration with a round index level of 5,000, not a real quote:
| Contract | Multiplier | Notional value at 5,000 | Value of a 40-point move |
|---|---|---|---|
| Micro E-mini S&P 500 | $5 per point | $25,000 | $200 |
| E-mini S&P 500 | $50 per point | $250,000 | $2,000 |
A 40-point move is less than 1% of the index, yet it moves a single micro contract by $200. That is the leverage built into futures.
Margin in a futures account: initial, maintenance and daily settlement
Futures margin is a performance deposit, not a loan. The exchange sets a minimum initial margin to open a position and a lower maintenance margin below which the account must not fall; brokers can require more. At the end of each day, every open position is marked to market: the day's gain is added to your account and the day's loss is taken from it.
Illustrative figures for one long micro contract, with an assumed initial margin of $1,500 and maintenance margin of $1,350 (real levels change and are set by the exchange and broker):
| Day | Index change | Daily settlement | Account equity | What happens |
|---|---|---|---|---|
| Start | – | – | $1,500 | Position opened |
| 1 | −20 points | −$100 | $1,400 | Still above maintenance |
| 2 | −30 points | −$150 | $1,250 | Below $1,350: margin call for $250 to restore $1,500 |
| 3 | +50 points | +$250 | $1,750 | After the $250 deposit, equity rises to $1,750 |
If a margin call is not met in time, the broker can close the position at the market price, locking in the loss. In fast markets, losses can exceed the money in the account.
Why index futures move before the opening bell
US equity index futures trade from Sunday to Friday, from 18:00 to 17:00 New York time the next day, per CME Group's schedule. The shares in the index, by contrast, trade mainly from 09:30 to 16:00. So when news breaks overnight or data is released at 08:30, futures are where the reaction shows first.
That is why news screens show futures as a stand-in for the US stock market live before the open. It is a useful signal, with two caveats. First, a futures price differs from the index by a fair value gap that reflects interest costs and expected dividends until expiry, so "futures up 0.3%" is not the same as the index being up 0.3%. Second, pre-market signals often fade or reverse once the full cash market opens. Our homepage shows how to read the rest of the day, and the stock market guide explains how the opening auction sets the first price.
Futures or a fund for index exposure?
A long-term investor who wants to own the S&P 500 does not need a futures account. An index fund or ETF holds the shares directly, needs no margin, passes on the dividends it receives and has no expiry date. Futures suit a different job: short-term exposure, hedging an existing portfolio, or trading outside the cash session. The leverage that makes them efficient for those tasks is exactly what makes them dangerous as a substitute for buying and holding.
Expiry, rolling and costs
Equity index futures expire on a quarterly cycle. Traders who want to keep exposure roll the position: they close the expiring contract and open the next one, paying commission and spread twice. Costs in a futures account usually include a broker commission, exchange and regulatory fees per contract, and any platform or data fees; our guide to trading fees explained covers how to add them up.
Reader questions
Can I trade futures in my normal share account?
Usually not. Futures are held in a separate futures account, often with different approval steps, margin rules and investor protection from an ordinary share account.
What is a margin call in futures?
A demand to add money when your account falls below the maintenance margin after the daily settlement. If you do not meet it, the broker can close your position.
Do futures show where the stock market will open?
They give an early indication, because they trade overnight. But they include a fair-value gap for interest and dividends, and early moves often change once the full market opens.
Sources
- CME Group, Micro E-mini equity index futures FAQ and contract specifications
- US Commodity Futures Trading Commission, futures commission merchant rules
- National Futures Association, investor information on futures
- US Bureau of Labor Statistics, release schedule