Futures are contracts to buy or sell a particular asset (or cash equivalent) on a specified future date.

Around the world, futures contracts are traded over commodities such as gold, wool and soybeans, financial instruments such as government bonds and currencies, and equities.

On ASX, futures contracts are traded over three sharemarket indices, the S&P/ASX50 Index, the S&P/ASX200 Index and the S&P/ASX 200 A-REIT Index.

When you buy an S&P/ASX200 Index (SPI) , you agree to 'buy' the index underlying the futures contract on a specified date in the future. When you sell a future, you agree to 'sell' the index at that time. At maturity of the contract a cash settlement takes place. Whether you make a profit or loss at maturity depends on how the index has moved in the period since the futures contract was traded.

The full value of the futures contract is not paid or received when the contract is established. Instead both buyer and seller pay an initial margin, which is a small percentage of the value of the contract. The traded price is the basis on which profit or loss is calculated at maturity or on closing out the position if this takes place before maturity.