What index futures are
A stock index future is a derivative that fixes today the price at which an index such as the S&P 500 or Nasdaq-100 will change hands on a set future date. The cash index is only recalculated during the regular session, when its component stocks trade, but index futures trade for far longer. That is why they are often used to gauge which way the market mood has leaned overnight or early in the morning, while the regular session is closed. This guide is not about how to trade futures; it is about reading futures charts as a tool for following the overnight flow.
Trading hours and Korean time
Major US index futures trade almost around the clock on weekdays, with a short break once a day. The exchange sets the exact trading hours and break, and they can change, so check the official information. Seen from Korea, this has some practical uses.
- US index futures are moving during the Korean daytime, while the Korean market is open
- When US data comes out before the regular session, the first reaction shows up in index futures
- Trading stops over the weekend and reopens as the new week begins
- Korean stock index futures also have a night session; check the exchange's information
Why the futures price differs from the index
Put an index future and the cash index side by side at the same moment and the numbers will not quite match. The futures price reflects interest rates until expiry and the dividends the index's stocks will pay in the meantime. This difference narrows as expiry approaches and all but disappears at expiry. So rather than reading the futures price as if it were the index level, it is more accurate to look at how far the future has risen or fallen from a reference point, as a percentage change.
An order for reading the overnight flow
If you open a futures chart in the morning and look only at the current price, your reading will wobble. Settling on this order lets you get more out of the same chart.
- Use the futures price at the close of the regular cash session as your reference
- Measure how far the future has moved from that reference as a percentage
- Check when it moved, and whether that lines up with a data release or another region's market opening
- See whether volume came with the move and whether other assets such as yields and currencies moved too
Continuous charts and contract rolls
Because futures expire, several contracts with different expiry dates trade on the same index at once. The continuous chart a charting program shows is usually the nearest contract stitched together over time. On the day it rolls to the next contract, the price difference between the two can leave a step-like gap in the continuous chart. To avoid mistaking that gap for a real surge or plunge, check which contract you are looking at and whether the chart adjusts prices at each roll.
Limits and common mistakes
Index futures show the overnight mood; they do not forecast the next regular session's direction. Trading is lighter at night, so small orders can move the price, and a single piece of news just before the open can flip the mood. The link between US futures and the Korean market is also tangled up with other factors such as exchange rates, local news and foreign investor flows, so it cannot be drawn in a straight line. Common mistakes include looking at numbers without a reference point, reading a roll gap as a sudden move, and building rules from one or two experiences.
Check it with this site's live tools
The world markets overview shows the current level of major indexes, which markets are open, Treasury yields and exchange rates, and front-month oil and gold futures on one screen. Stock index futures themselves are not in this tool, so check index futures quotes on your broker's or the exchange's screen. The world clock shows the current time in New York and the time difference, and the stock comparison tool lets you compare the daily paths of several indexes started at 100 on the same day. Prices may be delayed.
Things to keep in mind
This guide explains how to use index futures charts as a reference for the overnight flow; it is not investment advice and does not encourage futures trading. Futures let you trade a large amount with a small margin deposit, so losses can exceed the money you put in. Check trading hours, margin and eligibility requirements in the official information from the exchange and your broker. Investment decisions and their outcomes are your own responsibility.
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