What does Dow futures tumble mean?

[mumom95]

I'm about as far from an expert on the stock market and economy as you can get. We have a financial planner that does all our investing for us.

I was just reading the breaking news on CNN about Dow futures tumbling. Can someone explain this to me, because I don't understand since the Wall Street hasn't even opened yet.

The article sure made it sound like today wasn't going to be a good day for investments.

 

[mumom95]

I guess whatever it meant wasn't good.

Wall Street has only been open 5 minutes and it's already down over 400 points.

 

[punkin]

I guess whatever it meant wasn't good.

Wall Street has only been open 5 minutes and it's already down over 400 points.

That''s exactly what futures mean-that they expect the Dow to open down.

 

[sbell111]

Futures trading is the trading of stocks where the actual exchange won't be made until some future date. Basically, I agree to sell you a stock (or commodity or whatever) for X dollars next Tuesday.

If you think that the price of the whatsit is going to go down five dollars and I think it will go down ten dollars in that time, we will agree to make the sale at a price that is down six dollars. Next Tuesday, I buy the stuff at market price and complete the sale with you. If the price did actually drop ten dollars, I make four. If the price only fell four dollars, I lose two dollars and you end up getting it below market value.

There are ways to hedge against each of our losses, but that's a different class.