Stock futures are an alternative form of investment that makes it possible to speculate on the price of a stock at some point in the future. With this type of investment, you still earn money with the movement of a particular security, but you do not necessarily have to own that security to make money on the deal. The basic idea behind stock futures is that you enter into a contract to buy or sell a specific number of shares of stock at some point in the future. Once that date has been reached, you buy or sell the shares at the predetermined price. You also have the right to sell a futures contract after you have negotiated it with another party. Some investors use this as a way to hedge their investments. For example, if you buy a particular stock and you are worried that it will decline in value, you could purchase a futures contract that will protect your investment. You negotiate the price of the futures contract for slightly less than what you paid for the stock. Then if the value of your stock declines by the date of the futures contract, you can simply sell your shares for the negotiated rate. This reduces the potential of losing money on the investment. Another way to use these contracts is to benefit from price movement in a stock without actually investing in the stock. If you own a futures contract on a stock that has gone up in value and you paid very little for it, you could turn around and sell that contract to another investor. This allows investors to make money by simply buying and selling contracts instead of having to take possession of the stock. If you use stock futures as a way to hedge your portfolio risk, you do have to consider the cost of the contract. Futures contracts are not free and this cost will come out of any profit that you make from the increase in value of the stock. If the price of the contract makes sense, then using a future contract to protect your investments can be a worthy investment.