An Equity futures contract traded on an organized exchange. In this contract parties commit to buy or sell a specified amount of an individual equity or a basket of equities or an equity index at an agreed contract price on a specified date.
Equity futures are of two types :-
Index Future: This type of equity future has a index as its underlying. Like Dow Jones future. It settles in cash settlement only on a specified date.
Stock Future: This kind of future contract has a stock as its underlying and stock price defines the value of a future contract. generally settled in cash or stock.
While the pre-dominant form of trade in equities was in the form of Cash (or spot), on most exchanges today, futures are the preferred mode of trade in equity today.