How far into the future is a stock future?  How do stock futures work?
Context is key here. Futures don't really have to do with a time in the future in this context.  Futures are a capital market (futures market), just like Stocks are a market (stock market). Both capital markets have the ability to affect each other. Up until 30 years ago there was a separate use for the futures market, but in the days since they are MOSTLY used for stock derivatives (financial futures are the most widely traded contracts since 1980, hugely eclipsing the commodity futures that the market was designed for.)  So there is overlap and one affect the other, I'm not going to go into too much detail here but basically the futures market trades 24 hours a day, 6.5 days of the week and the  stock market trades 8-12 hours a day, 5 days a week.  So when the stock market closes, the futures market is still running will react and effect the broad stock market.  Hope that gets you started in your research "Futures are an agreement to buy or sell something in the future.  The futures ""price"" is the price at which you agree to make the trade.  This price does not indicate what will happen in the future so much as it indicates the cost of buying the item today and holding it until the future date.  Hence, for very liquid products such as stock index futures, the futures price is a very simple function of today's stock index value and current short-term interest rates.  If the stock exchange is closed but the futures exchange is open, then using the futures price and interest rates one can back out an implied ""fair value"" for the index, which is in essence the market's estimate of what the stock index value would be right now if the stock market were open.  Of course, as soon as the stock exchange opens, the futures price trades to within a narrow band of the actual index value, where the size of the band depends on transaction costs (bid-ask spread, commissions, etc.)."
@Tim - in this case, a futures contract isn't like an options contract. It's simply a method of entering into an agreement for delivery at a future date.  While the speculators appear to have taken over, there are practical examples of use of the futures market.  I am a gold miner and I see that my cost is $1200/oz given my quality of ore. I see the price of gold at $1600 and instead of worrying that if it goes too low, I run at a loss, I take advantage and sell contracts to match my production for the next year (or as long as the contracts go, I forget how far out gold futures are).  Of course I give up the higher price if gold goes higher, but this scenarion isn't speculation, it's a business decision.  The bread maker, on the other hand, might buy wheat futures to guarantee his prices for the next year. "Doing your homework means to perform what's more accurately called ""fundamental analysis"". According to proponents of fundamental analysis (FA), it is possible to accurately determine how much a stock should trade for and then buy or sell the stock based on whether it trades above or below this target price. This target price is based on the discounted anticipated future earnings of your stock, so ""doing your homework"" means that you figure out how much future earnings you can expect from the stock and then figuring out at what rate you want to discount those future earnings (Are 1000 dollars that you'll earn next year worth $800 today or $900 or only $500? That depends on the overall economic and political climate...) So does this make any sense? Depends. I'm aware that there are a lot of anecdotes of people researching a stock, buying that stock and doing well with that stock. But poor decisions can at times lead to good outcomes... EDIT: Due to some criticism, I want to expand on a few points. So, is homework completely for naught? No!" "As I stated in my comment, options are futures, but with the twist that you're allowed to say no to the agreed-on transaction; if the market offers you a better deal on whatever you had contracted to buy or sell, you have the option of simply letting it expire. Options therefore are the insurance policy of the free market. You negotiate a future price (actually you usually take what you can get if you're an individual investor; the institutional fund managers get to negotiate because they're moving billions around every day), then you pay the other guy up front for the right of refusal later. How much you pay depends on how likely the person giving you this option is to have to make good on it; if your position looks like a sure thing, an option's going to be very expensive (and if it's such a sure thing, you should just make your move on the spot market; it's thus useful to track futures prices to see where the various big players are predicting that your portfolio will move). A put option, which is an option for you to sell something at a future price, is a hedge against loss of value of your portfolio. You can take one out on any single item in your portfolio, or against a portion or even your entire portfolio. If the stock loses value such that the contract price is better than the market price as of the delivery date of the contract, you execute the option; otherwise, you let it expire. A call option, which is an option to buy something at a future price, is a hedge against rising costs. The rough analog is a ""pre-order"" in retail (but more like a ""holding fee""). They're unusual in portfolio management but can be useful when moving money around in more complex ways. Basically, if you need to guarantee that you will not pay more than a certain per-share price to buy something in the future, you buy a call option. If the spot price as of the delivery date is less than the contract price, you buy from the market and ignore the contract, while if prices have soared, you exercise it and get the lower contract price. Stock options, offered as benefits in many companies, are a specific form of call option with very generous terms for whomever holds them. A swaption, basically a put and a call rolled into one, allows you to trade something for something else. Call it the free market's ""exchange policy"". For a price, if a security you currently hold loses value, you can exchange it for something else that you predicted would become more valuable at the same time. One example might be airline stocks and crude oil; when crude spikes, airline stocks generally suffer, and you can take advantage of this, if it happens, with a swaption to sell your airline stocks for crude oil certificates. There are many such closely-related inverse positions in the market, such as between various currencies, between stocks and commodities (gold is inversely related to pretty much everything else), and even straight-up cash-for-bad-debt arrangements (credit-default swaps, which we heard so much about in 2008)." Options are an indication what a particular segment of the market (those who deal a lot in options) think will happen. (and just because people think that, doesn't mean it will)  Bearing in mind however that people writing covered-calls may due so simply as part of a strategy to mitigate downside risk at the expense of limiting upside potential.  The presence of more people offering up options is to a degree an indication they are thinking the price will fall or hold steady, since that is in effect the 'bet' they are making.  OTOH the people buying those options are making the opposite bet.. so who is to say which will be right.  The balance between the two and how it affects the price of the options could be taken as an indication of market sentiment (within the options market) as to the future direction the stock is likely to take. (I just noticed that Blackjack posted the forumula that can be used to model all of this)  To address the last part of your question 'does that mean it will go lower' I would say this.  The degree to which any of this puts actual pressure on the stock of the underlying instrument is highly debatable, since many (likely most) people trading in a stock never look at what the options for that stock are doing, but base their decision on other factors such as price history, momentum, fundamentals and recent news about the company.  To presume that actions in the options market would put pressure on a stock price, you would need to believe that a signficant fraction of the buyers and sellers were paying attention to the options market.  Which might be the case for some Quants, but likely not for a lot of other buyers.   And it could be argued even then that both groups, those trading options, and those trading stocks, are both looking at the same information to make their predictions of the likely future for the stock, and thus even if there is a correlation between what the stock price does in relation to options, there is no real causality that can be established.  We would in fact predict that given access to the same information, both groups would by and large be taking similar parallel actions due to coming to similar conclusions regarding the future price of the stock.  What is far MORE likely to pressure the price would be just the shear number of buyers or sellers, and also (especially since repeal of the uptick rule) someone who is trying to actively drive down the price via a lot of shorting at progressively lower prices.  (something that is alleged to have been carried out by some hedge fund managers in the course of 'bear raids' on particular companies) When you buy a futures contract you are entering into an agreement to buy gold, in the future (usually a 3 month settlement date).  this is not an OPTION, but a contract, so each party is taking risk, the seller that the price will rise, the buyer that the price will fall.  Unlike an option which you can simply choose not to exercise if the price goes down, with futures you are obligated to follow through. (or sell the contract to someone else, or buy it back)  The price you pay depends on the margin, which is related to how far away the settlement date is, but you can expect around 5% , so the minimum you could get into is 100 troy ounces, at todays price, times 5%.  Since we're talking about 100 troy ounces, that means the margin required to buy the smallest sized future contract would be about the same as buying 5 ounces of gold.  roughly $9K at current prices. If you are working through a broker they will generally require you to sell or buy back the contract before the settlement date as they don't want to deal with actually following through on the purchase and having to take delivery of the gold.  How much do you make or lose? Lets deal with a smaller change in the price, to be a bit more realistic since we are talking typically about a settlement date that is 3 months out. And to make the math easy lets bump the price of gold to $2000/ounce.  That means the price of a futures contract is going to be $10K   Lets say the price goes up 10%,  Well you have basically a 20:1 leverage since you only paid 5%, so you stand to gain $20,000. Sounds great right?  WRONG.. because as good as the upside is, the downside is just as bad.  If the price went down 10% you would be down $20000, which means you would not only have to cough up the 10K you committed but you would be expected to 'top up the margin' and throw in  ANOTHER $10,000 as well.  And if you can't pay that up your broker might close out your position for you. oh and if the price hasn't changed, you are mostly just out the fees and commissions you paid to buy and sell the contract.  With futures contracts you can lose MORE than your original investment.  NOT for the faint of heart or the casual investor.  NOT for folks without large reserves who can afford to take big losses if things go against them.  I'll close this answer with a quote from the site I'm linking below The large majority of people who trade futures lose their money.   That's a fact. They lose even when they are right in the medium term,   because futures are fatal to your wealth on an unpredicted and   temporary price blip. Now consider that, especially the bit about 'price blip' and then look at the current volatility of most markets right now, and I think you can see how futures trading can be as they say 'Fatal to your Wealth' (man, I love that phrase, what a great way of putting it)  This Site has a pretty decent primer on the whole thing. their view is perhaps a bit biased due to the nature of their business, but on the whole their description of how things work is pretty decent.  Investopedia has a more detailed (and perhaps more objective) tutorial on the futures thing.  Well worth your time if you think you want to do anything related to the futures market. With regard to commodity futures, a paper released in January 2010 by Aulerich, Irwin, and Garcia, concluded that index funds have essentially no impact on commodity futures. Looking at stocks, a stock that gets included in a major index does increase in price. It increases its turnover by 27% and increases its price by between 2.7% and 5.5%, according to information cited by Kula in this paper, though it looks like the price increase tends to happen in the lead up to the stock being included. Interestingly, I have read an article but cannot now locate it, which states that there's a measurable, albeit fairly small, price bubble on stocks included in common indexes, on Monday mornings, Friday afternoons, and at the start and end of the month. That is, the times when mutual funds are most likely to rebalance their holdings. This almost certainly applies to a lesser extent to other stocks, too. My understanding is that the price difference was very small, however. Generally speaking, stocks which make part of well-known indexes will tend to be in higher demand than stocks which do not. It remains the case that almost all actively-managed mutual funds are unable to consistently beat the indexes, even with this taken into account. "A ""stock price"" is nothing but the price at which some shares of that stock were sold on an exchange from someone willing to sell those shares at that price (or more) to someone willing to buy them at that price (or less). Pretty much every question about how stock prices work is answered by the paragraph above, which an astonishingly large number of people don't seem to be aware of. So there is no explicit ""tracking"" mechanism at all. Just people buying and selling, and if the current going price on two exchanges differ, then that is an opportunity for someone to make money by buying on one exchange and selling on the other - until the prices are close enough that the fees and overhead make that activity unprofitable. This is called ""arbitrage"" and a common activity of investment banks or (more recently) hedge funds and specialized trading firms spun off by said banks due to regulation." In India, as suggested above, short/long position can be taken either in F&O or Spot market. The F&O segment short/long can be kept open for appx. 3 months by taking position on the far contract. In intra-day/Spot market, usually the position has to be squared at the end of day or the broker will square it during expiry (forcibly). However, having said that, it is a broker specific feature, as per National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) any transaction has to be settled at the end of T+2 days (T being the trade day). Some brokers allow intra-day positions to be open for T+1 or T+2 days as long as the margin is provided. This is a broker specific discretion as the actual settlement is on T+2 (or in some cases as the exchange specifies). So, in general, to short a stock for a longer time, F&O segment should be used.