While both futures and stocks are exchange traded investment tools, there are some significant differences:

1. Stocks represent ownership in the asset
2. Futures are an agreement for a future exchange
3. Margin requirements are different
4. Futures are useful for hedging purposes
 

Both futures and stocks are traded on organized exchanges. Without exchanges, traders would have to trudge from farm to farm to get the best price on pork bellies or call each bank in a country to get the best exchange rate. Stock investors would need to go door to door to get the best price for their stocks. Exchanges create efficiencies in both markets.

People who use the futures market hoping for profits are more accurately called speculators.Speculators fall into a different category from hedgers who trade futures for price protection and who may expect to make or take delivery of what they are trading. Stock investors are an ownership position in the company, also known as being “long” since owners anticipate making profits by holding stocks in the long term.

This also is an important difference between futures and stocks. Stocks represent ownership in a corporation whereas futures contracts represent a future obligation to receive or deliver a commodity at a future date. There is no ownership in a futures contract, only an obligation…an important distinction.
 

Finally, the length of time you typically hold a futures contract is usually less than the time a share of stock is held. While stock investments generally suggest a long-term time frame, futures investors may commit their funds for only a few minutes, hours, days or possibly months.

Video: Why Trade Futures?