What are stock futures and why should you care?
The other morning the wife asked me what stock futures were. That got me so pumped up just thinking about derivatives, I probably didn’t need a cup of coffee. I can be such a nerd 
Anyways, I figured this would be a great topic to get back into the flow of blogging on FrugalJim, so let’s get going.
The reason this topic was brought up in the first place was because the talking heads on TV and/or the web articles written in the morning like to give a shout out to the stock futures. They do this to try and give an indication for how the market is going to act once they open up for the day.
Digressing a little, stock futures are derivatives. These aren’t actually a stock you can buy or sell, but are “derived” from actual stocks. Just like stock options, they allow you to speculate whether a stock will go up or down at some point in the future. Not only can you do this with less money than you would need if you wanted to buy the stocks outright, but you can do it outside the normal stock market hours.
The talking heads simply look at the futures to get an estimate of which way the market is moving and act like they know how the market will behave. The ironic thing is they never go back and see if they were right or wrong. Just because the market starts off strong, doesn’t mean it won’t tank in the afternoon.