Index futures vs index CFDs vs ETFs: pricing, costs, rollover and leverage compared

Index futures, index CFDs and index ETFs all let you take a position on a stock index such as the S&P 500, but they are different products. A future is a standardised exchange contract with an expiry date and a price that includes interest and dividends until expiry. A CFD is a private contract with your provider, priced from the index or its futures, with financing charged separately or built in. An ETF is a fund that owns the shares and charges an annual fee, with no leverage. Which is cheapest depends mostly on how long you hold and how much leverage you use.

The trading index CFDs guide explains the two kinds of index CFD (cash and futures-based) in detail, and the ETFs explained guide covers how funds work. This guide puts the three side by side.

The three products in one paragraph each

Index futures are listed on exchanges such as CME in Chicago and Eurex in Frankfurt. Each contract has a fixed value per index point and a fixed expiry, usually quarterly. Trades are cleared through a central counterparty, positions are marked to market every day, and margin is set by the exchange and your broker.

Index CFDs are contracts for difference between you and your CFD provider. There is no exchange and no clearing house; your counterparty is the provider. You choose the size in lots, often with small minimums. A cash CFD has no expiry and charges or credits financing each night; a futures-based CFD expires with the underlying future. The CFD basics guide covers the product in general.

Index ETFs are funds listed on stock exchanges that hold the index's shares, or replicate them synthetically. You buy units with your own money, own them outright, and pay an annual fee deducted inside the fund. There is no margin call and no financing charge, but also no leverage, unless you buy a specialised leveraged product.

How index futures are priced: fair value and basis

A futures price is not a forecast. It reflects the cost of holding the index until expiry, which is why it normally differs from the cash index level. The difference is called the basis.

The logic is an arbitrage. Instead of buying the future, an investor could borrow money, buy all the shares in the index, collect dividends until expiry, and repay the loan. The future's fair price is roughly what that strategy costs:

• Fair value ≈ cash index + interest cost until expiry − expected dividends until expiry.

When interest rates are higher than the index's dividend yield, futures trade above the cash level. When dividends are higher than interest rates, they trade below it.

Worked example: fair value

All numbers are illustrative.

• Cash index: 5,000.
• Interest rate: 4% a year.
• Expected dividend yield: 1.3% a year.
• Days to expiry: 90.

Interest cost: 5,000 × 4% × 90 ÷ 365 = 49.32 points. Expected dividends: 5,000 × 1.3% × 90 ÷ 365 = 16.03 points. Fair value: 5,000 + 49.32 − 16.03 = 5,033.29.

So the future should trade about 33 points above the cash index. As expiry approaches, the interest and dividend components shrink, and on the expiry date the future settles at the index level. That gradual shrinking of the basis is called convergence, and it is how a futures buyer pays for carry: the future drifts towards the cash level even if the index does not move.

This is also why a futures chart and a cash index chart show different numbers on the same day, and why futures-based CFDs are quoted at a different level from cash CFDs. The commodity futures guide explains the same idea for commodities, where storage costs replace dividends and contango is common.

How index CFDs are priced

Providers usually derive index CFD prices from the futures market, because futures trade nearly around the clock and are the most liquid reference.

• A cash CFD takes the futures price and subtracts the provider's estimate of the basis to arrive at a cash-equivalent level. It has no expiry. Each night you hold it, the provider charges long positions interest on the notional value (a benchmark rate plus a markup) and usually credits or charges shorts (the benchmark minus a markup). Dividend adjustments are applied on ex-dividend dates for price indices.
• A futures-based CFD simply mirrors a specific future, including its basis, and expires with it. There is no separate financing charge or dividend adjustment, because both are already in the price, but spreads are usually wider and the position must be rolled to keep it open.

The provider's markup is the key difference from futures. A futures buyer pays carry at roughly the market interest rate embedded in the basis. A cash CFD buyer pays the benchmark plus a markup, which is often in the range of a few percentage points a year. The swap and overnight financing guide explains how these charges are calculated.

Contract sizes: why futures can be too big

Futures come in fixed sizes. Some widely traded examples:

• E-mini S&P 500 (CME): 50 dollars per index point. The Micro E-mini is 5 dollars per point.
• E-mini Nasdaq-100 (CME): 20 dollars per point. The Micro version is 2 dollars per point.
• DAX futures (Eurex): 25 euros per point, with smaller Mini-DAX and Micro-DAX contracts.
• Euro Stoxx 50 futures (Eurex): 10 euros per point.

At an S&P 500 level of 5,000, one E-mini contract controls 250,000 dollars of index exposure and one Micro E-mini controls 25,000 dollars. A trader with a 10,000 dollar account who wants to risk 1% with a 40-point stop needs a position worth 2.50 dollars per point, which is smaller than even one Micro contract. CFDs, which can be traded in fractions of a lot, solve that problem. The index CFD position sizing guide shows the calculation, and the instruments position size calculator runs it for you.

ETFs avoid the problem differently: you can buy a single unit, but each unit costs its full price.

Margin, leverage and protection

• Futures: margin is a fixed amount per contract set by the exchange, which brokers may increase. It changes with volatility. ESMA's retail leverage caps were imposed on CFDs, not on exchange-traded futures, so the effective leverage can be higher than a retail CFD client would be allowed. Negative balance protection is a CFD rule too: a futures trader can lose more than the money in the account and owe the difference.
• CFDs: for retail clients in the EU and UK, major index CFDs are capped at 20:1 leverage, a 5% margin requirement, with a 50% margin close-out rule and negative balance protection. The ESMA leverage limits guide explains these rules.
• ETFs: you pay the full price. There is no margin call and you cannot lose more than you invested, but you also commit far more capital for the same exposure.

The instruments margin calculator shows the CFD margin on any index position.

Trading hours

• CME equity index futures trade almost 23 hours a day from Sunday evening to Friday afternoon, New York time, with a daily break of one hour.
• Eurex index futures trade from early morning to late evening Central European Time.
• Index CFDs generally follow the futures hours, because that is where their prices come from, with short breaks set by the provider.
• ETFs trade only while their listing exchange is open. A UCITS ETF on the S&P 500 listed in London or Frankfurt trades during European hours, even though the underlying shares trade in New York, so its price during the European morning is based on market makers' estimates.

Rollover and expiry

Equity index futures on CME and Eurex usually expire quarterly, on the third Friday of March, June, September and December. To keep a position beyond expiry, a futures trader sells the expiring contract and buys the next one, usually during the week or so before expiry when liquidity moves to the next contract. Each roll costs a round of commission and spread, and the new contract trades at a different level because its basis covers a longer period.

Futures-based CFDs roll in the same way, either manually or automatically by the provider, often with a charge. Cash CFDs never expire, which is their main convenience, but they pay financing every night instead. ETFs never expire either. The CFD rollover and expiry guide covers the mechanics of rolling futures-based CFDs.

Worked example: cost by holding period

All numbers are illustrative. They are chosen to show how the costs behave, not what any provider charges.

The aim in each case is a long exposure of 5 dollars per S&P 500 point with the index at 5,000, so a notional value of 25,000 dollars. Assumptions:

• Interest rate: 4% a year. Dividend yield: 1.3% a year.
• Cash CFD: 0.5-point spread (2.50 dollars per round trip); financing at the benchmark plus a 2.5% markup, so 6.5% a year, with dividend adjustments credited at 1.3% a year. Net carry: 5.2% a year, or 25,000 × 5.2% ÷ 365 = 3.56 dollars a day.
• Micro E-mini future: 0.25-point spread (1.25 dollars) plus 2.50 dollars of commission and fees per round trip, so 3.75 dollars. Carry is paid through convergence at the interest rate minus dividends: 2.7% a year, or about 1.85 dollars a day. Each quarterly roll costs another 3.75 dollars.
• ETF: 25,000 dollars paid in full; a 0.1% annual fee (25 dollars a year); 5 dollars of dealing costs per round trip; dividends of 1.3% received. The money tied up could otherwise earn 4% a year.

Holding for one day

• Cash CFD: 2.50 + 3.56 = about 6.06 dollars.
• Micro future: 3.75 + 1.85 = about 5.60 dollars.
• ETF: about 5 dollars of dealing costs, plus 25,000 dollars of capital committed for the day.

Over one day the costs are similar and dominated by spreads and commissions.

Holding for 30 days

• Cash CFD: 2.50 + (3.56 × 30) = about 109 dollars.
• Micro future: 3.75 + (1.85 × 30) = about 59 dollars, with no roll in this period.
• ETF: about 5 dollars of dealing, 2 dollars of fees, and roughly 82 dollars of forgone interest, less about 27 dollars of dividends: about 62 dollars in economic terms.

Holding for a year

• Cash CFD: 2.50 + (25,000 × 5.2%) = about 1,303 dollars.
• Micro future: 3.75 + (4 rolls × 3.75) + (25,000 × 2.7%) = about 694 dollars.
• ETF: 5 + 25 + 1,000 of forgone interest − 325 of dividends = about 705 dollars in economic terms, but with the full 25,000 dollars committed.

What the example shows

Over a year, the future and the ETF cost roughly the same in economic terms, because both pay carry at about the market interest rate: the future through its basis, the ETF through the interest you give up on your own cash. The cash CFD costs more by roughly the size of the financing markup, here 2.5% of 25,000 dollars, or 625 dollars. In exchange it offers small position sizes, no expiry, and the CFD protections described above. Over a few days, the difference hardly matters.

These conclusions depend entirely on the inputs. With a lower markup, wider futures commissions, or a much higher interest rate, the ranking can change. The comparing trading costs guide shows how to build the same calculation from your own provider's figures.

Other differences worth knowing

• Counterparty. Futures are cleared by a central counterparty. A CFD is a contract with your provider, so the provider's financial strength and regulation matter; the broker licence check guide explains how to verify it. An ETF's assets are held separately from the fund manager.
• Ownership. None of the three gives you voting rights in the index companies. An ETF gives you ownership of fund units; futures and CFDs give you a contract.
• Availability. Retail investors in the EU generally cannot buy US-listed ETFs because they lack the required key information document, so they use UCITS ETFs listed in Europe instead.
• Tax. Treatment differs by country and by product, and can be a deciding factor. It is outside the scope of this guide; check the rules where you live.

Common mistakes

• Comparing a futures price with a cash price. The basis is not a mispricing. A future 30 points above the cash index may be exactly where it should be.
• Ignoring the financing markup on cash CFDs. For short-term trades it is small. For positions held for months, it often becomes the largest cost.
• Forgetting that futures carry is paid too. The future drifts towards the cash level over time. It is not a free alternative to CFD financing.
• Underestimating futures size. One E-mini contract is a very large position for most retail accounts.
• Assuming the same protections apply. Negative balance protection and ESMA leverage caps apply to retail CFDs, not to exchange-traded futures.
• Letting a futures-based CFD expire by accident. Check the expiry date and whether the provider rolls it automatically.

Frequently asked questions

Why is the index future price higher than the index?

Because the futures price includes the cost of carry until expiry: the interest you would pay to hold the shares, minus the dividends you would receive. When interest rates exceed the dividend yield, futures trade above the cash index. The gap, called the basis, shrinks to zero by expiry.

Are index CFDs priced from futures?

Usually, yes. Futures trade nearly around the clock and are the most liquid reference. A cash CFD is the futures price adjusted for the provider's estimate of the basis, while a futures-based CFD follows a specific future directly, basis included.

Which is cheaper, an index CFD or an index future?

For short holding periods the difference is small and depends on spreads and commissions. For longer holds, futures are usually cheaper because they pay carry at close to the market interest rate, while cash CFDs add a financing markup. CFDs offer smaller sizes, no expiry and retail protections in exchange.

Do index futures pay dividends?

No. A futures holder does not receive dividends. Expected dividends are instead reflected in the futures price, which is lower than it would otherwise be by the dividends expected before expiry.

Can I lose more than my deposit trading index futures?

Yes. Futures are marked to market daily, and in a large move losses can exceed the money in the account, leaving you owing the broker. For retail CFD clients in the EU and UK, negative balance protection limits losses to the account balance, but the account can still be lost entirely.

Is an ETF better than a CFD for long-term index exposure?

They suit different purposes. An ETF has no leverage, no margin calls and a low annual fee, but needs the full amount up front. A cash CFD lets you take the same exposure with a 5% deposit, but the nightly financing makes it expensive to hold for long periods, and leverage magnifies losses. Most retail CFD accounts lose money.